Developments in Information & Knowledge Management for Business Applications: Volume 2 [2] 3030766314, 9783030766313

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Studies in Systems, Decision and Control 376

Natalia Kryvinska Aneta Poniszewska-Marańda   Editors

Developments in Information & Knowledge Management for Business Applications Volume 2

Studies in Systems, Decision and Control Volume 376

Series Editor Janusz Kacprzyk, Systems Research Institute, Polish Academy of Sciences, Warsaw, Poland

The series “Studies in Systems, Decision and Control” (SSDC) covers both new developments and advances, as well as the state of the art, in the various areas of broadly perceived systems, decision making and control–quickly, up to date and with a high quality. The intent is to cover the theory, applications, and perspectives on the state of the art and future developments relevant to systems, decision making, control, complex processes and related areas, as embedded in the fields of engineering, computer science, physics, economics, social and life sciences, as well as the paradigms and methodologies behind them. The series contains monographs, textbooks, lecture notes and edited volumes in systems, decision making and control spanning the areas of Cyber-Physical Systems, Autonomous Systems, Sensor Networks, Control Systems, Energy Systems, Automotive Systems, Biological Systems, Vehicular Networking and Connected Vehicles, Aerospace Systems, Automation, Manufacturing, Smart Grids, Nonlinear Systems, Power Systems, Robotics, Social Systems, Economic Systems and other. Of particular value to both the contributors and the readership are the short publication timeframe and the world-wide distribution and exposure which enable both a wide and rapid dissemination of research output. Indexed by SCOPUS, DBLP, WTI Frankfurt eG, zbMATH, SCImago. All books published in the series are submitted for consideration in Web of Science.

More information about this series at http://www.springer.com/series/13304

Natalia Kryvinska · Aneta Poniszewska-Mara´nda Editors

Developments in Information & Knowledge Management for Business Applications Volume 2

Editors Natalia Kryvinska Department of Information Systems Faculty of Management Comenius University Bratislava, Slovakia

Aneta Poniszewska-Mara´nda Institute of Information Technology Lodz University of Technology Łód´z, Poland

ISSN 2198-4182 ISSN 2198-4190 (electronic) Studies in Systems, Decision and Control ISBN 978-3-030-76631-3 ISBN 978-3-030-76632-0 (eBook) https://doi.org/10.1007/978-3-030-76632-0 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

The second volume of this series subline continues to explore different aspects of information and knowledge managing as well as doing business with information. We survey further the key aspects of managerial implications of the informational business. The novel methodologies and practices for the business information processing, as well as application of mathematical models to the business analytics and efficient management, are examined. The first chapter “Study on Wide-Ranging Ethical Implications of Big Data Technology in a Digital Society: How Likely Are Data Accidents in the COVID-19 Reality?” is dedicated to the wide-ranging ethical implications of big data technology in a digital society. Until now, much discussion of big data is focused on its transformational potential for technological innovation and efficiency; however, less attention was given to its ethical implications beyond the generation of commercial value. Thus, the authors investigate the wide-ranging ethical implications of big data technology. The subsequent chapter “Application of Business Rules Mechanism in IT System Projects” deals with the use of the mechanism of business rules in information systems. It facilitates the implementation of business logic, which is expressed in the form of precise and legible rules. The work is divided into two parts. The first part deals with the approach to business rules based on the literature studies. The second part of the work deals with the practical use of trade rules mechanisms. Within this part, the BiblioRule information system was designed. In the next chapter titled “Data-as-a-Service versus Information-as-a-Service: Critical Differences in Theory, Implementation, and Applicability of Two Growing Cloud Services,” the authors indicate that by an exponential increase of data produced and processed in all industries, data-oriented services are having increasing importance. Companies are seeking for services related to administration of data, data analysis, and preparation of insights. Accordingly, the authors focus on detailed understanding of both data-as-a-service and information-as-a-service on cloud. The authors seek to find a clear definition and a specification for the DaaS, IaaS, as well as contrast two concepts, highlighting which service is better in which situation for what kind of company. v

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The chapter authored by Wolfgang Neussner “Management and Measuring Customer Loyalty in Digital Marketplace—Analysis of KPIs and Influence Factors in CLTV” explores that in a highly competitive digital business environment, the management of customer loyalty becomes particularly important, especially when new customers can only be won at considerable expense and in manageable numbers. As the author claims—it is essential to strengthen customer loyalty to the company in order to ward off competitive marketing campaigns in the best possible way. Thus, this research analyzes and compares the concept of bonus programs in the retail industries of Austria, Germany, and Switzerland. The research is supplemented by the development of purchase decision processes. Besides, the implementation in companies is quantitatively surveyed and compared with the theoretical concepts. The next chapter presents a study on the “Cost-Effective Solutions in Cloud Computing Security.” As the author notices—the popularity and advances in technology recently have created a great deal of interest in cloud computing, especially for enterprises. However, as the author explores—despite the cloud computing platform offers a cost-efficient solution, there is a big drawback when it comes to security and the real costs behind it. Thus, this work examines some of the most efficient existing solutions for security in cloud computing, presents a short overview of the progress in literature and research that tackle such issues, and investigates the models and methods of calculating the costs of security in cloud computing. While engaging qualitative and quantitative methods, different analyses were carried out to finally present the state-of-art in cloud security research and present the existing cost calculation methods. In the chapter “Marketing Communication and Its Role in the Process of Creating Rational Awareness of Generation Z Representatives” authored by Katarína Gubíniová, Peter Štarchoˇn, Lucia Vilˇceková, Gabriela Pajtinková Bartáková, and Jarmila Brtková observes significantly negative responses to the principles of marketing in the form as described so far. Phrases such as “marketing tricks” and “marketing lies” are used more and more frequently in both domestic and foreign professional literature. Consumer market representatives themselves characterize many of today’s marketing activities as “intrusive”, “disturbing”, “misleading,” and “deceptive”. Based on such associations, marketing both as a scientific discipline and as a functional area of management often becomes despised. Hence, the authors evaluate in this paper a perception of marketing and marketing communication on the basis of quantitative and qualitative analysis on the representative sample of 1248 Generation Z respondents (i.e., age range 18–29 years) in terms of how positive/negative they perceive the current activities of organizations in marketing communication assessing their impact on creating rational awareness about products. The chapter authored by Yuanxin Li “How is Data Visualization Shaping Our Life? The Application of Analytics from Google Trends During the Epidemic of COVID-19,”discusses how has the diverse information acquisition methods greatly enriched user behavior habits. The paper provides also a case study of the application of the methods of big data in China, to fight against the epidemic. As the author claims—during the epidemic, users tended to search actively from passive information viewing. Further, the author establishes hypotheses, studies how to achieve

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“value-added” data in big data search, and guides government decision making through data visualization. In the next chapter on the “Analysis of the Practices of Financial Intelligence Units (FIUs) and Other Anti-money Laundering Agencies Within EU,” Darko Panevski, Tomáš Peráˇcek, and Katarína Rentková focus on the chain of suspicious transactions analysis in Europe, from banks, to financial intelligence units, to courts, and examine the way in which financial data are interpreted and shared across the security chain, leading to security decisions like frozen assets, closed accounts or criminal convictions. At present, there is NO comparative research on the work of European FIUs. The authors’ ultimate goal was to make an independent conceptual contribution to the understanding of financial security by analyzing the implementation of different lows mechanisms and information systems models, in order to find better solutions that will ensure efficiency, effectiveness and easy access to the information required. In the chapter authored by Helena Kiß and Rozália Sulíková “Modern Approaches to Leadership Development—An Overview,” it is examined which modern approaches to leadership development predominate in both theory and practice. In the modern economy, organizations are distinguishing themselves by qualified leaders. These decisively determine the success or failure of an organization and thus are an elementary part of personnel development. But before leaders can effectively perform, they need be identified as potentials and further developed. Hereby, it is of importance to identify the professional and interdisciplinary qualifications of leaders and to prepare them to successfully meet future organizational requirements and thus to contribute to its success. As the authors state, the result shows that there is an enormous wealth of opportunities that organizations can embrace. It would therefore make sense for further research to empirically investigate whether and which measures are known to the organizations and, above all, if they are actually being used effectively. In the next chapter named “Crowdfunding and Uncertain Decision Problems—Applying Shannon Entropy to Support Entrepreneurs,” it is presented an introductory motivation by making transparent recent developments in crowdfunding, as it has become an interesting and widely accepted alternative to finance start-ups and projects. Furthermore, there are provided insights into the decision making of the involved crowdfunding actors in their triadic relationship. Based on empirical data collected from five in-depth expert interviews, the authors identified several factors, which influence the behavioral decision process of an entrepreneur when making a choice on a crowdfunding platform for their crowdfunding campaign. On an example of two of those identified factors, the authors formalize the entrepreneur’s decision process using Shannon entropy and give a numerical example. The chapter “The Impact of Electronic Services on Traditional Services” studies the quality of e- and classical services—in the last years, and companies have seen that the quality of the services they provided is becoming more and more important. They try to reach as many clients as possible and try to improve their services. New technologies (Internet, computers, smartphones) are something that companies are taking advantage of, and there has been a huge change in the way services are provided. There are less physical contacts between companies and clients and even

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less contacts by phone (already being exceeded). Companies like Amazon, Netflix, or Uber are good examples of how the way companies provide services is changing, taking advantage of new technologies, and making everyone’s life easier. In the research performed by Daniela Nováˇcková, Jarmila Wefersová “Use of Digital Technologies in Business in Slovakia,” it is defined, by the descriptive analysis, a phenomena and the processes related to the use of digital technologies within the framework of business in some areas in Slovakia. The study opens a discourse on the digital economy that changes the system of business and represents a challenge for new jobs. With the help of data obtained from the websites of major entities, while applying the principles of legal logic and systematics, accuracy, and the possibility of generalizing, the authors have concluded that digital technologies are widely used in Slovakia in business, with the banking sector at the forefront. Due to the increasing use of digital technologies, the authors also addressed in this study an issue of personal data protection. The chapter presents an analysis of impacts from laws of the European Union on the formation of a digital market in Slovakia. The chapter called “Business Information Through Choice-Based Conjoint Analysis: The Case of Electric Vehicle Home Charging” and authored by Marvin Klein, Christine Strauss, Christian Stummer demonstrates the generation of information through choice-based conjoint analysis using the example of electric vehicle charging. As the authors claim—there are several alternatives for electric vehicle charging, with home charging being the main charging point for most of today’s electric and plug-in hybrid electric vehicles. Therefore, a large number of consumers consider home charging as mandatory when buying a car. Before blindly investing in the construction of charging stations close to citizens’ homes, decision makers (e.g., policy makers) need to learn about the impact of possible measures. Thus, the chapter examines whether performance improvements in alternative vehicles (e.g., in terms of range or charging time) or governmental incentives (e.g., price subsidies) could compensate consumers for not having home charging stations. Findings reveal that, in general, both electric and plug-in hybrid electric vehicles profit from the construction of home charging stations, but its perceived benefit decreases continuously with faster charging times at public charging stations. However, at the present time, when the technological progress of electric vehicles remains low, monetary subsidies for environmentally friendly vehicles appear to mainly support only sales of plug-in hybrid electric vehicles. In the next chapter “The Combination of “Loft” and “High-Tech” Styles in the Formation of Interior Spaces for IT Companies,” Olena Ivanochko and Jennifer R. Calhoun focus on an idea of the office design, to reflect the accepted style of the company, and express that image in every detail, inclusive of the interior. The outcome is to provide an exclusive brand image. Nowadays, interior design is especially popular for IT companies. Arranging an office space for an IT company, provides a creative interior project, which perfectly fits the corporate style of the company in its exclusive design, and original approach to the employee workspace and the creation of a unique image. Particular attention is paid to ergonomics and office zoning. The interior of the room has a significant impact on those who stay in it for a long time.

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The next chapter named “Is Pillar 3 a Good Tool for Stakeholders in CEE Commercial Banks?” a Pillar 3 is explored as a tool for market discipline enhancement, which is supported by the analysis of the website data dedicated to Pillar 3 disclosures of the banking institution operating in CEE country. The analysis of the web portal is based on the time spent on the web page by the web users and evaluating their interest in relation to time spent and content of the Pillar 3 disclosures. The data consist of preprocessed data from a log file of a web portal of banking institution. The web portal pages were joined into logical web parts that were joined into specific categories. The results show statistically significant differences in the average time spent on the web parts, and the most average time was spent on the web part Annual Reports and Emitent Prospects. The Pillar3 Q-terly Info web part had the second least average time spent. This part was analyzed in more detail and its categories with the most time spent by the web users were identified. They are Individual financial statements, shareholders, and risk management, which can indicate different importance of these web categories for stakeholders based on its content or its high volume. The research performed in the chapter “Factors Behind the Long-Term Success in Innovation—In Focus Multinational IT Companies” is focused on aspects of longterm innovativeness of multinational IT companies. Annually, there are several lists of the most innovative IT companies published, and many of IT companies are appearing in the first places for several years in a row. Thus, the research is focused on those factors that enable these companies to maintain their innovativeness for several years. In order to identify the factors, the authors have compared investments into R&D of the four most innovative multinational IT companies and we conducted a survey about factors of corporate culture in IBM as one of the representatives of innovative multinational IT companies. Additionally, they reviewed business models of these companies in order to find out similarities and attitudes, which might have a positive influence on a long-term generation of innovations. The interview in the Innovation Center of IBM allowed to gain deeper insight into its processes. Thanks to our research, we were able to identify specific factors of long-term innovativeness of multinational companies, which may be a source for further investigation as innovation management offers a wide range of perspectives since the field is continuously developing. The chapter “eServices and Gaming Industry—Value-Creating Ecologies as Main Factor for Customer Acceptance of Digital Servitization,” Vladorchuk et al. show that the development of value-creating ecologies can be considered as the main factor for the customer acceptance of servitization in the creative industries. And regarding servitization, it is important to design services in a way that they can generate additional value even for those customers who do not consume such services. It is important to enabling the customer to become a cocreator having him involved as a partner in this process. In the chapter “Sharing Economy Business Models: Informational Services Innovation and Disruption in Uber and Airbnb,” the authors investigate two most known sharing economy platforms, Uber and Airbnb, with the focus on the technological functioning of their business models. The chapter examines the business models of the Uber and Airbnb platforms based on a review of previous studies. Based on the

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actual market situation in which companies currently find themselves and the challenges they may face in future, a SWOT analysis will be provided. Advancement of technologies, especially the Internet, cloud computing, smartphones, business intelligence, and geolocation have significantly influenced the enhancement of the sharing economy and trigger a novelty of their business models. Contributors of the sharing economy, mostly the technological revolution have caused the disruption of traditional business models, in the way the platforms create a demand-supply relationship with customers, derive revenues, as well as the functionality of the platforms in providing services. Further the chapter “Safe and Secure Communication between Two Cyber-Physical Systems: A Framework for Security” the authors examined CPSs that how can they build a safe and secure communication path between two CPSs and secure the correspondence of CPS with the help of MQTT protocol. The authors have planned the progression of its correspondence they set two CPS at two different places, which controls the water from the well to various tanks. In this development, diverse checks for securing the ports have been used. To test the presented framework for security, the authors have used two different tools for generating cyber-attacks named as LOIC and XOIC. In the next chapter “Investigation the Scope of Social Inequality by Accessing Telecommuting from Home Under Corona Pandemic,” the research focuses on the changing scope of teleworking and its influence on access differences accompanied by inequality. The research fundamentally bases on an extensive literature review using qualitative content analysis as outlined by Mayring to interpret the findings of 41 more comprehensive studies. Teleworking access under crisis crystallized more social inequality in contrast to the past and keeps employees under pressure and threats. This literature research can reveal relevant data and policy implications for tackling social inequalities that will moreover arise in the labor market under the long-term pandemic of COVID-19. The chapter authored by Daniel Pietrasik et al. “Building Online Stores Using PHP” discusses the basics of an ideal e-commerce solution for a company that would like to use its website as the main source of sales. The goal of this work is to analyze other websites, to define which sections the website should contain and what layout it should have to facilitate customer orientation and thus support sales. The work explains to readers the basic theoretical knowledge with the help of domestic and foreign experts, and it also presents ISO standards, the Data Protection Act (GDPR), VAT in the European Union, and more. And the final chapter “Information Exchange Platform Based on a Q&A Model” analyzes information exchange platforms found on the Internet, how they operate, what benefits they offer, and what disadvantages they pose. To understand the operation more deeply, the authors created own questions-and-answers system. In later sections, the authors discuss how this system is created, how users can interact while on the platform, and what best practices we used based on our previous analysis of other similar platforms. Based on the own research and the system created, the authors conclude that while creating a Q&A platform is with the right knowledge easy to implement, and it acts as a very useful tool to support the free exchange

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of information. Especially in the field of business, such a system may be a major advantage in the field of marketing, recruiting, and customer support or when used internally to support the exchange of ideas and experiences between employees. Bratislava, Slovakia Łód´z, Poland June 2021

Natalia Kryvinska [email protected] Aneta Poniszewska-Mara´nda [email protected]

Contents

Study on Wide-Ranging Ethical Implications of Big Data Technology in a Digital Society: How Likely Are Data Accidents in the COVID-19 Reality? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Izabella V. Lokshina and Cees J. M. Lanting Application of Business Rules Mechanism in IT System Projects . . . . . . . Sylwester Balcerek, Vincent Karoviˇc, and Vincent Karoviˇc

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Data-as-a-Service versus Information-as-a-Service: Critical Differences in Theory, Implementation, and Applicability of Two Growing Cloud Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Ilias Wagner and Zuzana Tacacs Management and Measuring Customer Loyalty in Digital Marketplace—Analysis of KPIs and Influence Factors in CLTV . . . . . . . 151 Wolfgang Neussner Cost-Effective Solutions in Cloud Computing Security . . . . . . . . . . . . . . . . 177 Lumbardha Hasimi Marketing Communication and Its Role in the Process of Creating Rational Awareness of Generation Z Representatives . . . . . . . . . . . . . . . . . 203 Katarína Gubíniová, Peter Štarchoˇn, Lucia Vilˇceková, Gabriela Pajtinková Bartáková, and Jarmila Brtková How is Data Visualization Shaping Our Life? The Application of Analytics from Google Trends During the Epidemic of COVID-19 . . . 223 Yuanxin Li Analysis of the Practices of Financial Intelligence Units (FIUs) and Other Anti-money Laundering Agencies Within EU . . . . . . . . . . . . . . 241 Darko Panevski, Tomáš Peráˇcek, and Katarína Rentková Modern Approaches to Leadership Development—An Overview . . . . . . . 271 Helena Kiß and Rozália Sulíková xiii

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Crowdfunding and Uncertain Decision Problems—Applying Shannon Entropy to Support Entrepreneurs . . . . . . . . . . . . . . . . . . . . . . . . . 289 Valerie Busse and Christine Strauss The Impact of Electronic Services on Traditional Services . . . . . . . . . . . . . 305 Dragana Saric and Marian Mikolasik Use of Digital Technologies in Business in Slovakia . . . . . . . . . . . . . . . . . . . 335 Daniela Nováˇcková and Jarmila Wefersová Business Information Through Choice-Based Conjoint Analysis: The Case of Electric Vehicle Home Charging . . . . . . . . . . . . . . . . . . . . . . . . . 357 Marvin Klein, Christine Strauss, and Christian Stummer The Combination of “Loft” and “High-Tech” Styles in the Formation of Interior Spaces for IT Companies . . . . . . . . . . . . . . . . 381 Olena Ivanochko and Jennifer R. Calhoun Is Pillar 3 a Good Tool for Stakeholders in CEE Commercial Banks? . . . 421 ˇ Petra Blažeková, Lubomír Benko, Anna Pilková, and Michal Munk Factors Behind the Long-Term Success in Innovation—In Focus Multinational IT Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441 Martina Halás Vanˇcová and Iryna Ivanochko eServices and Gaming Industry—Value-Creating Ecologies as Main Factor for Customer Acceptance of Digital Servitization . . . . . . 485 Alex Vladorchuk, Michaela Schaffhauser-Linzatti, Marian Mikolasik, and Iryna Ivanochko Sharing Economy Business Models: Informational Services Innovation and Disruption in Uber and Airbnb . . . . . . . . . . . . . . . . . . . . . . 521 Lucia Šepeˇlová, Jennifer R. Calhoun, and Michaela Straffhauser-Linzatti Safe and Secure Communication between Two Cyber-Physical Systems: A Framework for Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 Shahbaz Ali Imran and Sabina Akhtar Investigation the Scope of Social Inequality by Accessing Telecommuting from Home Under Corona Pandemic . . . . . . . . . . . . . . . . . 559 Katja Zöllner and Rozália Sulíková Building Online Stores Using PHP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587 Daniel Pietrasik, Loretta Pinke, Peter Veselý, and Oskar Karlík Information Exchange Platform Based on a Q&A Model . . . . . . . . . . . . . . 643 ˇ Emil Pytka, Ondrej Cupka, René Pawera, and Miloš Šajbidor

Study on Wide-Ranging Ethical Implications of Big Data Technology in a Digital Society: How Likely Are Data Accidents in the COVID-19 Reality? Izabella V. Lokshina and Cees J. M. Lanting

Abstract This chapter is dedicated to the wide-ranging ethical implications of Big Data technology in a Digital Society. Exponential growth in the commercial use of the Internet has dramatically increased the volume and scope of data gathered and analyzed by datacentric business organizations. Big Data emerged as a term to summarize both the technical and commercial aspects of this growing data collection and analysis processes. Until now, much discussion of Big Data is focused on its transformational potential for technological innovation and efficiency; however, less attention was given to its ethical implications beyond the generation of commercial value. In this chapter, the authors investigate the wide-ranging ethical implications of Big Data technology. The authors inform that strategies behind Big Data technology require organizational systems, or business ecosystems, that leave them vulnerable to accidents associated with its commercial value and known as data accidents. These data accidents have distinct features and raise important concerns, including about data privacy in the time of the COVID-19 pandemic. In this chapter, the authors suggest methods of successful risk mitigation strategies. Keywords Big data technology · Ethical implications · Datacentric business organizations · Business ecosystems · Data accidents · Risk mitigation strategies · COVID-19

1 Introduction Recently, as the use of the Internet has grown, so too has an interest in the use of data gathered and analyzed by arriving at a more digitized and technologically connected society [1–10]. In the 1998 film “Enemy of the State”, a rogue government agency I. V. Lokshina (B) MMI, SUNY Oneonta, Oneonta, NY, USA e-mail: [email protected] C. J. M. Lanting DATSA Belgium, VBR, Louvain 3010, Belgium e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_1

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is shown as having unlimited access to private data from a variety of data sources. At that point, the scenario was so disturbing to the Federal Bureau of Investigation (FBI) that a public relations campaign was launched to assure society that the plot was pure fiction [11]. Nevertheless, as recent exposures about data privacy have made clear, the surveillance shown in the film is very real at this time [2–10, 12–16]. What has changed is the role of governments as collectors and users of data, and the increasing importance of commercial entities as the drivers of both data gathering and analysis, i.e. data analytics [2–10, 13–15, 17, 18]. The COVID-19 emergency has taken place in an already digital society. The amount of pandemic-related data gathered and processed globally has been enormous. Additionally, advanced computational models, some based on machine learning, have shown tremendous potential in tracing sources or predicting the future spread of COVID-19, necessary for the planning of resources. Without correct data and models, the risk to public health cannot be assessed correctly, causing a problem that the authorities cannot allocate time, assets, and resources appropriately, leading to both penury, and oversupply, and waste. Therefore, it is essential to leverage Big Data technology and intelligent analytics and put them to effective use for the benefit of public health. Reliance on digital data sources has been of great value in outbreaks caused by new pathogens significantly improving data collection, however, precise data is still rare and hence forecasts are still less reliable and effective [19]. The needs and conditions for responsible data gathering and analysis at a global scale must be clear as Big Data technology has become critical for managing the COVID-19 pandemic in a digital society. The use of data that has been collected from digital sources for prediction and surveillance is very important in the fight against the COVID-19 pandemic, but it is equally important to use this data in compliance with data protection regulations and with due respect for privacy and confidentiality and recognizing its possibly limited validity or bias. Previous generations of information technology were dominated by technology companies with commercial strategies based on their expertise in hardware or software. Currently, many leading Internet companies have commercial strategies built around the collection and analysis of data. For datacentric business organizations like Google, Facebook, and others, the collection of data has become a target instead of a way to achieve any additional business goals [2–10]. This comes at a point when there is a growing interest from researchers in wide-ranging ethical implications of the increasing use of data in different areas, including data privacy [2–10, 12, 13, 15, 17, 20–24]; cyber-hacking [12, 16, 24–28]; government regulation [2–10, 17, 22, 23, 29]; and intellectual property [2–10, 12, 13, 15, 21, 30]. Besides, there are concerns about the level of government surveillance of commercial social networks, for instance revealed due to leaks by Edward Snowden [31]. In these circumstances, the term “Big Data” has obtained popularity in both business and public policy circles as summarizing industrial and commercial aspects of these

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state-of-the-art data gathering and analysis processes which involve also private data collection [2–10, 13, 15, 16, 28]. Until now, there has been much discussion of Big Data technology focused on its potential positive effects for both business and society [1–10, 32]. This extends beyond improvements to commercial efficiency and expands to claims about its transformational effect on such areas as healthcare and delivery of public services [2–10, 33]. Nevertheless, there has been less discussion on Big Data technology devoted to ethical issues. This is not surprising given the limited research on Internet ethics [2–10, 34] and limited understanding of wide-ranging ethical implications of new technologies started being deployed [2–10, 35]. Therefore, in this chapter, the authors have given thought to wide-ranging ethical implications of Big Data in a digital society, including during the COVID-19 pandemic, and evaluated ethical issues related to Big Data technology by applying the normal accident theory [2–10, 32, 36–41]. Normal accidents are “normal” in the sense that the occurrence of negative developments is inevitable and taking place unexpectedly in organizational systems that are complex, interactive, and tightly coupled [37–41]. The normal accident theory has been applied to investigate nuclear power plant accidents [42], underground coal mine devastations [36, 43–45] plane crashes [46], structural collapses [2–10, 36], failures in hospitals, anesthesia systems, the practice of medicine and perfusion producing shocking medication reactions [47], as well as most recent financial system fiascos [43–45, 48]. The authors believe that in high-risk systems distinguished by multiple and unexpected interactions, no matter how effective safety mechanisms are, normal accidents are inevitable [47]. These negative events take place regardless of the number of safety mechanisms, the quality of the care provided, or the awareness of operators. In other words, in complex systems, errors are made by humans [36, 43–45, 47]. The authors suggest that emerging datacentric business organizations, which can enable or be enabled by Big Data, have system features as identified in the normal accident theory. However, the consequences of normal accidents in these datacentric business organizations are less obvious than with natural disasters, which makes identification and remedy more difficult [32]. In this chapter, the authors discuss data accidents, which extend the normal accident theory by exploring the scale and interconnection, as well as uncertainty and distrust created by Big Data technology in a digital society. The authors investigate mostly wide-ranging ethical implications of Big Data since the consequences of data accidents must be weighed against the effectiveness and value achieved by society with the deployment of Big Data technology [2–10, 32]. This chapter is comprised of eight sections and organized as follows. Section two identifies key features of Big Data technology and datacentric business organizations that enable and are enabled by an exponential growth in data collection and analysis processes. This section also shows that large-scale data collection can help curb the COVID-19 pandemic; however, this process should respect data privacy and gain

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public trust. Section three analyzes normal accidents associated with state-of-theart and emerging technologies, outlines the normal accident theory, and explains specifics of datacentric organizational systems, or business ecosystems, that enable data accidents. Section four extends the normal accident theory by investigating distinct features and potential consequences of data accidents. This section also provides a classification of data accidents and analyzes scenarios of systemic, noncommercial, and commercial data accidents including examples related to COVID19. Section five explains what should be done to mitigate the risks and potential implications of Big Data technology given the growth in the industrial and commercial value of state-of-the-art and emerging technologies. This section also recommends successful strategies and best practices to maintain responsible data collection and processing standards on a global scale to safeguard business ecosystems, followed by the conclusion, acknowledgment, and references.

2 Views on Big Data Technology In this section, the authors present their views on Big Data technology. Although data has become strongly associated with information technology, managing and making sense of data remains an old problem. Historians, politicians, and military leaders have relied on information as a source of power, as well as a driving force, for centuries, while denying access to information has always been a lever to diminish power. However, what has changed is the speed and volume of data gathered to analyze. When, in the 1850s, managers of the United States railroads were searching for new organizational designs to help overcome the challenges of data overflow in the growing business, they were talking about the volume of data below a single megabyte in modern terms [49]. On the other hand, an important feature of data in modern business is a constant exponential growth in volume. To use just one contemporary statistic, 90% of all present data has been generated in the last two years [2–10, 22, 23]. Under these circumstances, Big Data first appeared as a term to describe the technological innovation supporting this tremendous increase in the volume of data that is collected and analyzed [2–10, 12, 27]. Beyond the volume of data, enabled to be collected, Big Data technology has also changed the complexity and velocity of data to be gathered and analyzed [2–10, 21]. Velocity refers to processing power, i.e. speed at which data may be collected and analyzed, with near real-time analysis becoming possible for very large datasets and complex analysis. Complexity, due to the volume and variety of data, is also very significant as it marks a transition from gathering data in only text format towards collecting data in metadata, video, audio, and image formats [2–10, 12, 50]. More recently, Big Data went far beyond its industrial roots to include wideranging commercial opportunities enabled by the analysis of data, i.e. data analytics [2–10, 22, 23, 33]. Therefore, Big Data as a term has been identified by politicians as

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the means for achieving economic growth. In the UK, Big Data has become one of the eight key government priorities [32, 51]. In the United States, Barrack Obama’s use of campaign data for the analysis has led to nicknaming him as the Big Data President [52]. This technological innovation has been supported by several economic factors. First, the cost of storing data has been reduced to the point that it might be economically feasible to store all forms of data even while there is no direct use for it. Second, the required hardware and software have now become readily available in the marketplace [2–10, 12]. Much of the software that currently supports Big Data have first appeared not from traditional technological companies with commercial strategies built around their expertise in hardware or software; but from datacentric business organizations where their specific demands have forced them to resolve their own Big Data technology issues. Particularly, to support the use of Big Data technology on a wide scale, much of this technology has become available through open-source modules, which helped datacentric business organizations to adopt Big Data technology for their specific needs [2–10, 12, 32, 53–55].

2.1 The Use of Big Data Technology on a Large Scale and Associated Commercial Opportunities In this subsection, the authors examine the use of Big Data technology on a large scale and related commercial opportunities. Big Data technology creates the potential for numerous commercial opportunities and innovations. The most common examples come from the major Internet companies for which data gathering and analysis, i.e. data analytics, are core competencies. For instance, [56] specified that Google has managed to develop an advanced spellchecker, not because of its competence in natural language processing or a unique approach to spelling, but due to collecting and analyzing a massive database of real spelling corrections. Other examples of commercial opportunities based upon similar technology usage scenarios include recommendation engines used by Amazon and Netflix that benefit from vast databases of user preferences on books and films to provide recommendations for future reference [9, 10, 56]. However, the commercial benefits of Big Data technology are not limited to Internet companies. Indeed, the McKinsey report that served to promote Big Data as a commercial strategy indicated the potential in healthcare, finance, and public services [2–10, 22, 23, 33]. For instance, in healthcare services distinguished by using fragmented datasets, Big Data technology has been proposed to help control increasing costs and accelerate research and development (R&D) processes in new pharmaceutical systems [2–10, 57].

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Specific features of commercial Big Data usage scenarios that have resulted in many advantages being less publicized as they are continuous improvements to existing processes. In other words, many Big Data usage scenarios are to continually improve existing processes rather than invent new procedures. A good example derives from the transition in airlines from relying on pilots to provide estimated time of arrival (ETA) information to employing a data-driven system, which combines several data sources including weather, radar, and flight schedules [58, 59]. Formerly, busy pilots could make generally accurate estimations; however, 30% of their estimations have been over 5 min off. Currently, by combining multiple data points with the use of automated algorithms, airlines obtained the power to virtually eliminate gaps between estimated and actual arrival times, saving millions of dollars per year for the airports [2–10, 59]. What brings all these examples together and makes them Big Data technology is a commercial value created by large-scale data analysis, i.e. data analytics, and not only by data gathering, together with subsequent merging data in multiple datasets. While these examples can illustrate commercial benefits from Big Data, the wideranging ethical implications of Big Data technology that may result from commercial manipulation remain unclear. Although the focus is often placed on the volume of data gathered, Big Data technology is less about the large volume of data and more on the capacity to search, aggregate, and analyze numerous large datasets [2–10, 22, 23, 60]. Up to this point, there are still not many concerns about the wide-ranging ethical implications of Big Data technology. Specifically, there are only a few concerns documented about the privacy implications of this technology in a digital society. There is nothing new about privacy concerns in the public domain related to new technologies be it photography [2–10, 61], personal computers [2–10, 16, 24, 28, 62], or the Internet [2–10, 13, 15, 16, 28, 32, 53–55]. However, typically, the nature of these concerns has masked the reality of how new technologies have used and analyzed data [2–10, 13, 15, 22, 23, 63]. Specifically, concerns about data privacy implications have been driven by fear over the active and visible data gathering process before passive and autonomous data gathering process, associated with Big Data technology [2–10, 12, 13, 15, 22– 24]. Therefore, concerns over data privacy implications directly related to Big Data have been less discussed among the users of Big Data technology or described in the literature because the users of this technology have less insight into running data gathering and analysis scenarios [2–10, 12, 13, 15, 22–24]. On the other hand, in this chapter, the authors investigate the lack of perspective when the nature of privacy risk is unknown. Returning to the main notion of Big Data technology, the authors restate that large volumes of data might be gathered and stored because it is economical and there is a potential for future analysis of this data, i.e. intelligent analytics, to create commercial value [12, 15]. However, the data use scenarios are undetermined, therefore wide-ranging societal implications of Big Data technology remain unknown and nontransparent.

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2.2 The Use of Big Data Technology for Managing COVID-19 Pandemic in a Digital Society In this subsection, the authors consider the use of Big Data technology to manage the COVID-19 pandemic. On January 30, 2020, the World Health Organization (WHO) director-general declared the coronavirus disease 2019 (COVID-19) outbreak a public health emergency of international concern (PHEIC). Several weeks later, the outbreak has been categorized as a pandemic. COVID-19 has already caused a hundred times more cases than the previous coronavirus-induced PHEIC, i.e. the 2002–2003 severe acute respiratory syndrome (SARS) outbreak, and the COVID-19 numbers are expected to grow. However, compared with the 2002–2003 outbreak, the COVID-19 disaster has taken place in a much more digitized and connected ecosystem. The amount of all data produced by 2003 is generated today within a few minutes. Furthermore, advanced computational models like those using machine learning have shown great potential in tracing sources or predicting the future spread of infectious diseases [2–10, 19, 64–66]. Therefore, it is imperative to leverage Big Data technology and intelligent analytics and put them to good use for the benefit of public health. Relying on digital data sources like data from mobile phones and other digital devices is of great value in outbreaks caused by newly discovered pathogens since precise data is still rare and hence forecasts less reliable and ineffective [19]. A recent study has shown the possibility of forecasting the spread of the COVID19 outbreak by combining data from the Official Aviation Guide with data on human mobility from the WeChat app and other digital services owned by Chinese tech giant Tencent [31]. Mobile phone data have shown potential in predicting the spatial spread of cholera during the 2010 Haiti cholera epidemic while leveraging Big Data analytics demonstrated effectiveness during the 2014–2016 Western African Ebola crisis [67]. However, during the recent epidemics, the large-scale collection of mobile data from millions of users, especially call data records and social media reports, have raised privacy and data protection concerns as well. In 2014, privacy concerns urged the GSM Association, i.e. an industry organization that represents the interests of mobile network operators worldwide, to issue guidelines on the protection of privacy in the use of mobile phone data for responding to the Ebola outbreak [68]. In the information-intensive reality of 2020, ubiquitous data points and digital surveillance tools can easily worsen those concerns. China, the country first and heavily affected by COVID-19, has reportedly used ubiquitous sensor data and health check apps to reduce the disease spread [69]. According to a New York Times report, there has been little transparency in whether and how this data was cross-checked and reused for surveillance purposes [70]. For instance, the report has stated that Alipay Health Code, an Alibaba-backed government-run app that supported decisions about who should be quarantined for COVID-19, also seemed to have shared information with the police [70].

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In Italy, the European country recording one of the largest numbers of the COVID19 cases, a local data protection authority has been urged in March 2020 to issue a statement to clarify the conditions of lawful data use for mitigation and containment purposes. In its statement, the authority warned against the privacy-infringing collection and processing of data by non-institutional actors, i.e. private employers. Two weeks later, the European Data Protection Board issued a statement on the importance of protecting personal data when used in the fight against COVID-19 and flagged specific articles of the General Data Protection Regulation (GDPR) that provide the legal grounds for processing personal data in the context of epidemics [71–73]. For instance, Article 9 allowed processing personal data “for reasons of public interest in the area of public health, such as protecting against serious crossborder threats to health,” provided such processing is proportionate to the aim pursued, respects the essence of the right to data protection and safeguards the rights and freedom of the data subject. As Big Data technology has become critical for managing the COVID-19 pandemic in the modern digital world, the conditions for responsible data collection and processing at a global scale must be clear. The authors consider that the use of digitally available data and algorithms for prediction and surveillance, i.e. identifying people who have traveled to areas where the disease has spread or tracing and isolating the contacts with infected people, has been of great importance in the fight against the COVID-19 pandemic. However, it is equally important to use these data and algorithms responsibly, in compliance with data protection regulations, and with due respect for privacy and confidentiality. Failing to do so could undermine public trust, which would make people less likely to cooperate in providing, when necessary in the public interest, travel and contact data, follow public health guidance or recommendations, and eventually, would result more likely in worse health outcomes [74]. Careful data management practices should govern both data collection and processing levels. At the data collection level, the principle of proportionality regarding affected people should apply, which means that the data collection intensity must be proportional to the seriousness of the public health threat. This data collection intensity must be limited to only what is necessary to achieve a specific public health objective and be justified on a scientific basis [2–10, 22, 23]. For instance, gaining access to data from personal devices for contact tracing purposes can be justified if it takes place within specific bounds, has a clear purpose, i.e. warning and isolating people who may have been exposed to the virus, and has no less invasive alternative, i.e. using anonymized mobile positioning data, is suitable for that purpose. On the other hand, “do it yourself” health surveillance like it was termed by the Italian data protection authority should be avoided as its contribution to public health safety is doubtful. At the data processing level, data quality and security controls are required. Data integrity weaknesses that are common when data from personal digital devices are used can introduce minor errors in one or multiple factors, which in turn can have an outsized effect on large-scale predictive models [4–10, 22, 23].

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Besides, data breaches, insufficient or ineffective anonymization, and biases in datasets can become major causes of distrust in public health services. Data privacy challenges not only are technological but also depend on political and judicial decisions. Requesting or warranting access to personal devices for purposes like contact tracing can be more effective than simply leveraging anonymized mobile positioning data. However, convincing providers to allow access to or even assist in decrypting cryptographically protected data, similar to what has occurred in the 2016 United States Federal Bureau of Investigation (FBI)—Apple encryption dispute, may be counterproductive, especially when the agreements between international authorities and service providers would lack transparency and proportionality [2–8]. Similar trade-offs could apply to health apps that require users to register with their names or national identification numbers. National authorities should realize that because personal data might contain valuable and sensitive information about the social interactions and recent movements of infected people, these must be handled responsibly. Overriding consent and privacy rights in the name of disease surveillance may fuel distrust and ultimately turn out to be disadvantageous. There have been reports that China’s digital epidemic control might have worsened stigmatization and public distrust [110]. This risk of distrust is even greater in countries where citizens place a much lower level of trust in their government like Italy, France, and the United States [75]. Therefore, whenever access to these data sources is required and considered to be proportional, a society should be adequately informed [2–10, 22, 23]. Secrecy about data access and use should be avoided. Transparent public communication about data processing for the common good must be pursued. For instance, data processing agreements should disclose what data has been transmitted to third parties and for what purpose. Reports from Taiwan have shown a promising way to leverage Big Data analytics to respond to the COVID-19 crisis without fueling public distrust [76]. Taiwanese authorities integrated their national health insurance database with travel history data from customs databases to assist in case identification. Other technologies like QR-code scanning and online reporting have been used also for containment purposes [76]. These measures have been combined with public communication strategies involving frequent health checks and support for those under quarantine [76]. The authors consider as more countries prepare to use digital technologies in the fight against the COVID-19 pandemic, Big Data technology, represented by large-scale data collection and intelligent analytics, is among the best methods, provided applied appropriately [2–10, 17, 22, 23].

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3 Views on Big Data Technology In this section, the authors present their views on accidents associated with state-ofthe-art and emerging technologies. The authors note that technological development has always produced a divide between the economic advantages and societal implications. The question is not whether technological progress in certain ways defines society, but the extent to which it does define society [2–10, 77]. Although currently, data appears to be the main element in the discussion about wide-ranging ethical implications of information, communications, and computing technologies, this was not always the case. By defining a notion of ethical overload, [78] identified wide-ranging ethical issues that could relate to computer technology. The concerns were associated with speech recognition, biotechnology, and the effect on the workplace structure from working at home that currently has become an important ethical overload in the COVID-19 reality, while there has been little reference to the role of data itself [2–10, 78]. This example demonstrates the challenges related to predicting the consequences of state-of-the-art and emerging technologies, even when these technologies are wellunderstood themselves. The researchers have described these challenges by stating that under similar circumstances “the new immorality is to act in ignorance of future consequences” [2–10, 32, 78]. Although physical accidents and natural disasters have regularly taken place in society, the latest complex, embedded technologies require special attention [2–10, 79–81]. The authors consider that normal accident theory could help explain the consequences of these latest technologies, as well as the need for a better understanding of why disastrous situations and catastrophic events are likely to take place [2–8, 36, 43–45].

3.1 The Normal Accident Theory and Normal Accidents In this subsection, the authors focus on the normal accident theory and associated normal accidents. An introduction of the normal accident theory has been launched from the report for the President’s Commission on The Accident at Three Mile Island after the 1979 nuclear accident at a power plant on that site [37]. The report concluded that the accident was not caused by discrete technical faults or human errors as it could have been expected but by a sequence of organizational failures that take place within systems like nuclear power plants that are complex, highly interactive, and tightly coupled [37–39]. Therefore, the focus of the document was not on identifying who to blame, but rather on investigating how organizational failures could develop causing such an accident to take place [37–39]. Generally, systems in which normal accidents can take place have two key features: complex interactivity and tight coupling [32, 36–45, 47, 48].

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Complex interactivity refers to the possibility of a chain of unknown and unplanned failures that take place in a sequence. This is contrary to linear interactivity which refers to a series of obvious, anticipated, and planned events that take place according to a known order [36–41, 43–45, 47]. Linearity does not suggest that a linear system is simple, i.e. missing complexity, but rather that events are well-understood and linearly take place. For instance, a production line for pharmaceuticals or the flight of airplanes are linear systems as these processes can be easily explained; however, they are not simple at all. An accident could also take place in these circumstances; however, based on its linear nature, consequences can be easily identified and fixed. For instance, when an unexpected situation takes place in a linear system like a production line, it can be simply identified and corrected by the staff. On the other hand, complex interactivity takes place when interactions are not fully understood by the staff who must take time-constrained decisions that are necessary to mitigate an accident [32, 36–41, 47]. Tight coupling refers to interactions that are discrete and take place very quickly. Therefore, the parts within an organizational system that is tightly coupled impact each other and trigger failures which transform into an accident [32, 37–41, 47]. In these circumstances, an accident is defined as a major, abnormal system failure, contrary to an incident defined as a minor, routine system failure. Therefore, an accident is a failure of the entire system and not of a certain part of the system; the outcome is that a chain of discrete system failures needs to arise before a system accident can take place [32, 36–41, 43–45, 47]. A challenge for the normal accident theory is that application of the term “system” is not properly defined despite its notion is placed in a center of the theory [82]. However, applying this term, the normal accident theory can change its focus from a discrete failure, i.e. a failure of a certain part of the system including human error, to a failure of the entire system. This means that now an organizational system where the accident can take place is the primary cause of a normal accident, and not the staff [83]. The term “normal accident” means that under specific circumstances an accident can become inevitable. This definition created an important disagreement between normal accident theorists and high-reliability academics since high-reliability thinkers suggested an option to design organizational systems that are complex, highly interactive and tightly coupled, and additionally, able to survive a normal accident [37–41, 82, 84, 85]. Normal accident theorists responded that numerous incidents, even complex incidents like multiple system failures, can be prevented while a normal accident is inevitable due to a failure of the entire system [37–41, 82, 84, 85]. Therefore, the main message of normal accident theorists is not about avoiding the risk but on how to deal with the consequences of a normal accident. This suggestion has put in question the overall relationship between technology and society; however, the notion of the normal accident theory remained the same. For instance, disasters caused by natural sources like pandemics known in the past and COVID-19; catastrophes prompted by industrial and technological sources like former accidents at nuclear power plants; and devastations caused by deliberate

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sources like terrorism and malicious acts of violence, have been inevitable and even growing: some of them could have been identified and narrowed, but never escaped [2–8, 36, 39, 40, 43–45, 86–88]. The notion that a normal accident is likely to take place in an organizational system has marked the normal accident theory against all other theories concerning technology risk. Therefore, in this chapter, the authors apply this view to the wideranging ethical implications of Big Data technology.

3.2 Normal Accidents Associated with Big Data Technology In this subsection, the authors define normal accidents associated with Big Data technology. The authors do not suggest that Big Data technology can create normal accidents. Instead, they assume that Big Data can play a critical role in shaping organizational systems where normal accidents are possible to take place. To demonstrate this assumption, they analyze Big Data technology against the fundamentals of the normal accident theory, i.e. complex interactivity and tight coupling. Besides, the authors expand the normal accident theory by considering specific circumstances in emerging datacentric business organizations that can enable or be enabled by Big Data technology where normal accidents are likely to take place. They also investigate uncertainty and distrust created by Big Data technology in a digital society since the consequences of normal accidents would have to be weighed against the effectiveness and value achieved by society from the deployment of this technology. Therefore, first, the authors state that Big Data technology displays features of a tightly coupled system. Such an argument seems like a counter-intuitive statement considering that the Internet is a prototype of a loosely coupled system that has been engineered to survive the destruction of some of its parts in a Cold war era. However, there is a tightly coupled infrastructure, independent of the Internet but only using it, which stands behind Big Data technology and companies that tie together datacentric business organizations, dependent on this technology. The authors also note there is an ongoing transition from datacentric business organizations that could control their technology stack toward cloud computing where storage and processing power are provided as service. While datacentric business organizations could develop software to gather data, to maximize efficiency they become more dependent on the deployment of large data centers operated by companies providing cloud services like Amazon, Microsoft, or Google. For all but very large business organizations, both the efficiency and flexibility offered by these multibillion-dollar data centers make it a prerequisite to apply third-party storage and likely computing technology [2–10, 22, 23, 32]. However, when there is a failure in data centers, the consequences are far more wide-ranging, unexpected, unpredictable, and dramatic than when datacentric business organizations use their own, distributed infrastructure that also, they can control. For instance, an accidental loss of data by a software developer who balanced

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traffic between many servers using Amazon Web Services on Christmas Eve 2012, resulted in a sequence of failures that made online services like Netflix unavailable on Christmas morning [4–8, 89]. In their explanation of the failure, Amazon has highlighted that only a small team of software developers had access to this data; at first, the software developers did not recognize an error; and initially, the entire software development team was mystified by an error message generated by the system [90]. However, the problem was resolved not with the use of technical resources, but by implementing a new process to ensure that changes to the system are double-checked to avoid accidental loss of data in the future. Second, the authors note concerning loose coupling that a distributed method by which Big Data has been collected and stored created intrinsic complexity among numerous datacentric business organizations and various technologies. Returning to a previous example of Netflix’s failure, the authors note that Netflix was dependent on the infrastructure of another datacentric business organization to deliver much of its content. Besides, Netflix was reliant on the business organization with whom it competed directly, i.e. Amazon’s Instant Video service. While a few datacentric business organizations can achieve vertical integration, most of them have become dependent on a growing network of third-party technology [2–10, 22, 23, 32]. Taking a hypothetical example of a mid-size online retailing company, besides hosting its website, its dependence on other websites, i.e. thirdparty technology, could include payment services like credit card companies, Paypal and Apple Pay; integration with social media; content delivery networks to provide video content; integration with a third-party customer relation management (CRM) services; courier and delivery services; web analytics tools and advertising servers; etc. [2–10, 17, 22–24]. Besides complexity that is essential for data collection, there is also a growing concern over efforts to find qualified employees who can effectively analyze data [2–10, 91]. Third, the authors state that a distinct feature of a normal accident and Big Data technology is a lack of shared understanding over risks. Datacentric business organizations that have been previously used as examples of a normal accident may be designated as systems that have understood what can create an accident, although they would likely disagree on the extent to which it can be considered as a normal accident. Besides, datacentric business organizations that frequently collected large amounts of data were governments that are expected to be motivated to respect data privacy. Both the lack of commercial incentives and restricted access to data has implied an increased level of control over data by datacentric business organizations. Instead, commercial requirements that enable or are enabled by Big Data technology have been developed around two fundamental processes: data collection with consequent analysis, i.e. data analytics, and data sharing [2–10, 13, 15, 17, 22–24]. The authors consider this transformation has established a different culture with risks for data privacy. Besides, it has put pressure on processes that generate

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a commercial value which can likely trigger normal accidents that the authors investigate in this chapter.

4 Views on Data Accidents Associated with Big Data Technology In this section, the authors suggest that normal accidents associated with Big Data technology have particular features that make them different from physical accidents that have been discussed in the normal accident theory [39, 92]. The term “data” is used on purpose instead of the term “information” as Big Data has been associated with unstructured data, i.e. data as opposed to structured data, i.e. information. From a technical viewpoint, applying structure to data requires defining particular features of data to gather before a data collection process is started. For instance, it must be defined in advance that certain data is either an image, sound, or text; or it is a name, currency, time, etc. [2–10, 22, 23]. The process of structuring data before its collection indicates that some consideration was granted to the final use of data. This may be a semantic viewpoint, but really helpful position to reinforce the main standard of Big Data technology informing that data can be gathered despite, and potentially, without knowledge of, the aim for its final use [2–10, 32, 79]. Additionally, the authors state that data accidents associated with large scale data collection should be considered based on the following classification [108]: • Systemic data accident involving a systemic incomplete or unreliable collection of data and limitations in the interpretation of data, such as • Systemic data accident involving a systemic incomplete or unreliable collection of data, i.e. • Systemic data accident resulting from the systemic incomplete collection of data, and • Systemic data accident resulting from the systemic unreliable collection of data. • Systemic data accident resulting from systemic limitations in the interpretation of data. • Data accident involving reliably collected and correctly interpretable data, such as • Data accident resulting from violations of data security compromising authorized access to data, i.e. “denial of service”. • Data accident resulting from violations of data security compromising data privacy by an unauthorized read access to data, i.e.

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• Data unintended disclosure, violating data privacy by exposing confidential data, where disclosure has limited consequences for the organization and others, and • Data unintended disclosure, violating data privacy by exposing confidential data where disclosure has serious consequences for the organization and others. • Data theft compromising data privacy by unauthorized access to data, i.e. • Data leak, undetected unauthorized access violating data privacy, • Data disclosure blackmail, where violating data privacy is used as a lever to unlawfully obtain funds or other benefits or concessions, and • Data exposure, where violating data privacy is a tool to intentionally expose data. • Data accident resulting from violations of data security compromising data validity by unauthorized manipulative access to data, i.e. • Data integrity loss, undetected unauthorized manipulative access violating both data privacy and integrity, • Data destruction blackmail, where unauthorized manipulative access to data is used as a lever to unlawfully obtain funds or other benefits or concessions, and • Data integrity loss, unauthorized, irrecoverable manipulative access violating both data privacy and integrity. Several important examples of data accidents associated with large scale data collection that demonstrate the relevance and use of the proposed classification are considered in the following subsections. These examples include systemic data accidents involving a systemic incomplete or unreliable collection of data and limitations in the interpretation of data corresponding to the COVID-19 data collection, interpretations, and decisions that are considered as special case data accidents associated with Big Data technology; as well as data accidents involving reliably collected and correctly interpretable data, containing undetected unauthorized access violating data privacy like in the Manning and Snowden data leak scenarios, along with violations of data security compromising both data privacy and integrity by unauthorized manipulative access to data like in the Johnson & Johnson and the World Anti-Doping Agency (WADA) data manipulation scenarios [9, 10, 32, 93–96].

4.1 Systemic Data Accidents In this subsection, the authors suggest the COVID-19 data, the following interpretations, and decisions derived from these interpretations should be defined as systemic data accidents associated with Big Data technology. These should be considered as special case data accidents because the problems in large scale data collection and

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interpretations are known, but considered inevitable; and the resulting interpretations and extrapolations are considered “best-effort”, “the best we have”, or “the all we get”. Additionally, the COVID-19 data is mostly gathered voluntarily; therefore, it is possibly or even likely incomplete. Also, the COVID-19 data can be incomplete due to errors before data is collected, i.e. some people dying at home or in an elderly home which may be considered rather as “natural death” than as COVID-19 fatalities. Additionally, the COVID-19 data can be incomplete because of the initial anonymization of data which may suppress severity and historical data, i.e. the number of people tested may be unknown when only the number of tests is recorded. Besides, there is feedback between collected data, interpretations, extrapolations, resulting actions, and the effect on the contamination and, consequently, on the causes behind the sources of properly collected data, which constitutes a difficulty to assess the challenge. This effect on the data sources makes it similar to non-systemic data accidents like scenarios of suspected silent manipulation, i.e. when manipulation is suspected but both nature and scope are unknown. Nevertheless, it is critically important to define the COVID-19 data, the following interpretations and decisions derived from these interpretations as a data accident since implications of problems with large scale data collection and interpretations are neither preventing local, regional, and national authorities nor stopping datacentric business organizations from making crucial decisions such as numbers of required hospital beds or intensive care unit (ICU) beds based on extrapolations from this data. The feedback between extrapolations, strategy, actions, reduction in COVID-19 spreading, and for instance, the number of required ventilators is also a problem. The number of ventilators, being built in the United States is likely based on a gross over-estimation of real need, without considering changes in both the therapy and spread due to measures to reduce the spreading of the COVID-19 pandemic. Besides, in assessing the deadliness of COVID-19, confusion is caused by failing to distinguish COVID-19 cases from COVID-19 infections. The case fatality rate is computed by dividing the number of deaths by the total number of confirmed cases. But to obtain an accurate COVID-19 fatality rate, the number in the denominator should be the number of infections instead of the number of confirmed cases. In the early days, only part of infected people was identified as confirmed cases that resulted in an inaccurate fatality rate which drove public policy and sowed fear and triggered the widespread lockdowns. The lockdowns have serious effects on public health. The United Nations (U.N.) estimated that 130 million additional people will starve this year because of economic damage resulting from the lockdowns [97]. Also, the parents stopped bringing their children in for immunization against diseases like diphtheria, pertussis, and polio. Many patients who have had cancer and needed chemotherapy did not come in for treatment, and the others skipped recommended screening or diabetic monitoring. Additionally, the lockdowns have severe psychological effects, especially among young adults and children, who are denied much-needed socialization.

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In this example, the local, regional, and national authorities are aware of problems in the COVID-19 data collection and resulting interpretations and extrapolations. Therefore, the main issue raised by this instance is that since authorities have approved the COVID-19 data manipulation given incomplete data collection and limitations in its interpretation that impact both the derived decisions and public opinion, then how society can expect that commercial applications of Big Data technology will not suffer from similar situations.

4.2 Noncommercial Data Accidents In this subsection, the authors consider noncommercial data accidents associated with Big Data technology. First, keeping in mind [39], the authors examine two recent examples of data loss accidents that have been described in the literature. Both examples are instances of information leaks that took place through two individuals associated with United States government organizations. One case is associated with Bradley (Chelsea) Manning who has been leaking United States diplomatic cables to Wikileaks [32, 93–95]. The other case is associated with Edward Snowden who has been leaking classified National Security Agency (NSA) data and procedures to various media organizations [32, 94–96, 98]. These instances do not illustrate direct commercial use of Big Data; however, they can help investigate issues around key features of data accidents. The authors note that in the Manning and Snowden scenarios the term “accident” is used to describe outcomes when original data losses have been caused not by “accidental” system failures but unexpected interactions in organizational systems. Nevertheless, the authors consider these scenarios were accidents as they were caused by the failures of entire systems designed to prevent data losses, not by discrete events [94–96]. Like with a previous scenario given for Amazon [89], data accidents have taken place by a combination of unexpected failures. In the Manning case, the Wikileaks incident has taken place over a junior staff member, Bradley (Chelsea) Manning, who has copied data, primarily diplomatic cables, to a CD-ROM and then contacted media [93–95, 98]. In the Snowden case, the precise method by which Edward Snowden has retrieved data from the NSA databases remains unknown, though it included copying data from a computer to a USB memory drive [94, 95, 99]. This simple method has not been taken into consideration because computers used to store sensitive data and confidential information are expected to have USB ports disabled. What is important, the fact that any of the Manning and Snowden data accidents took place unidentified until data was leaked to media. While accessing and downloading data, the full meaning of Snowden leaks has been unclear due to uncertainty in scope and Snowden’s intention to publicly distribute. In both examples, authorities have been unaware of data loss until it was leaked to the media. Besides, it has not been performed by a foreign government or a criminal

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organization that involves multiple actors. Instead, it has been performed by a single junior staff member who conducted regular organizational tasks; however, could quickly access and transfer large data volumes. Therefore, the authors suggest the main issue raised by these instances is that if single junior staff members in highsecurity organizations could access, download and circulate large data volumes, with much of it, like in the Snowden scenario, classified “Top Secret”, then how society can expect that commercial applications of Big Data technology will not suffer from similar situations. Next, the authors examine two recent examples of data manipulation accidents that have been described in the literature. Both examples are instances of database breaches when data has been accessed and altered in place, posing a serious threat for involved datacentric business organizations and concerned individuals [9, 10]. One scenario is associated with data manipulation in one of Johnson & Johnson’s insulin pumps in 2015, which enabled hackers to overdose on users with insulin. The other scenario concerns Russian hackers who breached the World Anti-Doping Agency (WADA) systems in 2016, changed in place medical data of many athletes, and then circulated this altered data damaging their reputation [9, 10]. These instances cannot illustrate direct commercial use of Big Data; however, they can help investigate issues around key features of data accidents. Healthcare and pharmaceutical industries are at risk of data manipulation accidents when patients’ lives are affected by tampering with data on what medications the patients are prescribed, how often they should take the medications, and what allergies the patients have. When healthcare data is manipulated on a large scale causing a great deal of harm, this is considered cyberterrorism [9, 10]. Data manipulation accidents not only prompt datacentric business organizations to lose their profits and customers, or patients, or users, but also show how cybersecurity and public health and safety are increasingly connected. In the Johnson & Johnson scenario, a security vulnerability in one of its insulin pumps enabled malicious actors to overdose several patients with insulin [9, 10]. Data manipulation accidents create opportunities to change reality for smear campaigns. By accessing data in organizational systems and altering it in place, data manipulation accidents are used to destroy the personal and professional reputations of various individuals. In the Russian hackers’ scenario, the WADA systems have been breached and the medical data of many famous athletes have been changed in place and then released [9, 10], with a clear objective, masking usage of forbidden enhancing products and procedures by others. Additionally, data manipulation accidents are intended to influence public opinions and impact decisions. When data is changed, inevitably, choices made based on this data are also manipulated. By performing calculated alterations to data, the decision-making process of people who use this data can be strategically controlled by malicious actors [9, 10]. In the global race for the development of a vaccine, understanding vaccine research and other specifics about the pandemic has become a main target for intelligence agencies around the world. Currently, “state-backed hackers” more likely to focus on highly sensitive information such as the COVID-19 vaccine research rather than

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just organizational data. For instance, throughout 2020, a Russian state-backed hacking group known as APT29 targeted various medical organizations involved in the COVID-19 vaccine development in Canada, the United States, and the United Kingdom, to access data in their organizational systems to use, leak, or manipulate [8, 9]. In these instances, data manipulation has been performed by a foreign government or a criminal organization, involving multiple actors. Therefore, the authors suggest the main issue raised by such instances is that if malicious actors could access data in organizational systems, alter data in place and then circulate, then how society can expect that commercial applications of Big Data technology will not suffer from similar situations.

4.3 Commercial Data Accidents In this subsection, the authors consider commercial data accidents associated with Big Data technology. The authors note this is difficult to directly estimate the potential for commercial data accidents because firstly, unlike in the Manning and Snowden scenarios discussed earlier, most commercial data accidents are not made public. Secondly, commercial data accidents have the key features that distinguish them from traditional “physical accidents” discussed earlier as well. These features make data accidents very difficult to identify, assess, and remedy. The first difference is the absence of physical artifacts that makes data accidents extremely difficult to identify when they take place. In prior noncommercial data accident scenarios, the first indication that data accidents took place became a fact that data was used at the time it was used. Therefore, if a sequence of incidents, i.e. minor failures involved in a nuclear accident, could be identified at a physical location, data accidents can be only discovered by the following data uses. The second difference is that the consequences of data accidents are neither geographically specific nor geographically positioned. Datacentric business organizations that collect data can be nationwide, at least in standard legal terms, but the Internet and Big Data technology enable them to collect data on people from around the world with very few limitations. Once data is lost, legally, or illegitimately, it can spread all over the world very quickly. An absence of geographical borders has some concerns in terms of authority when it applies to both reducing the consequences of data accidents and stopping the spreading [9, 10, 25, 100]. The third difference is that a specific time when the consequences of data accidents can be identified is very difficult to foresee. After physical accidents took place, the consequences can be estimated at a certain level. However, after data accidents took place, the consequences can be only noticed due to the following spreading of this data and its analysis [9, 10, 32, 36, 43–45]. And even then, the consequences could last for years in the future as new methods of data analysis can become available.

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4.4 Application of Normal Accident Theory to Real Data Accident Scenarios In this subsection, the authors inform that certain researchers believe that the normal accident theory has potential limits to be effectively applied to real data accident scenarios associated with Big Data technology. These researchers mention that the main limitation is the lack of real normal accidents proposed by the normal accident theory. They consider that many datacentric business organizations are highly reliable [109] and can avoid normal accidents [4–8, 37–41, 79–81]. For instance, [82] indicated that the absence of system accidents foreseen by [39–41] demonstrated that some potential scenarios of system accidents could be at some level attempts to manipulate data to promote the normal accident theory [39–41, 82]. Many researchers suggest that the Y2K scenario can be used to illustrate the potential limits for the application of normal accident theory to real data accidents. The Y2K problem has been a normal accident, which in many cases was designed out before it took place. Additionally, the Y2K scenario was a normal accident that demonstrated key features comparable to Big Data technology. Therefore, for many researchers, the Y2K scenario became the first example of considering the moral and societal implications of state-of-the-art and emerging technologies [32]. However, the real implications of the Y2K scenario were rather insignificant when compared with the anticipated extreme outcomes [101]. Therefore, the authors can agree that the case for data accidents is at some level compromised by the shortage of real data accidents [2, 3, 23, 102]. Recently, [40] evaluated analogous consequences in the context of the nuclear industry [40, 41]. The interpretation was that societal pressure despite only a few accidents that took place, helped develop a regulatory system that made it hard to establish nuclear power as an energy source. Therefore, apart from France and Japan, nuclear power continues to remain a restricted power source. Additionally, this regulatory system served to create a very different management structure with high costs, a moratorium on new nuclear power plant construction, and government ownership [40, 41]. Besides, this regulatory system revealed considerable costs to decommission nuclear power plants and sites. Therefore, keeping in mind the Fukushima nuclear accident in Japan, the authors assume that [39] simply suggested insufficient timeframes. The authors inform that the notion remains the same, i.e. the normal accident theory can be effectively applied to real data accidents associated with Big Data technology. Additionally, the authors notify that underestimating the potential consequences of state-of-the-art and emerging technologies due to unexpected and inevitable future is unwise and risky.

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4.5 Successful Risk Mitigation Strategies In this subsection, the authors discuss what should be done if data accidents would take place. For physical systems where the risk is catastrophic and the consequences of failures can greatly offset the potential advantages, [39] suggested that such systems must be terminated [39, 40]. However, [39] also admitted that in practice this recommendation could be unfeasible and less productive [39, 40]. In his theory, [39] assumed that the risk of emerging technologies can be assessed [39, 43–45]. However, given the abstraction of data accidents, a comprehensive and sensible risk analysis of data accidents is from very difficult to impossible. Additionally, the greater integration of data gathering and analysis processes in the social life indicates that the future direction of Big Data technology moves towards even bigger data. However, the authors inform that the volume and scope of Big Data and the presence of technology that potentially enables more effective data analysis and storage will not increase the risk of data accidents. Instead, the risk of data accidents can arise from uncertainty and distrust that surround the data gathering process creating a modern “gold-rush” situation when datacentric business organizations with the largest data collections can win, even when the commercial value of volume data remains unknown. One risk mitigation strategy can be to accept the costs derived from reducing data privacy and advantages obtained from reducing public information asymmetry. However, it cannot be achieved without compromising the legal and regulatory system that governs customer data collection and usage [2–10, 17, 32]. The entire history of governing commercial activities associated with consumers demonstrates that the regulation takes place “with a rear-view mirror” and with anticipated retroactive consequences like the regulation of pharmaceuticals and tobacco. Therefore, changes made to the regulatory system may take place retrospectively. Another, more challenging risk mitigation strategy can be to establish a relationship between data gathering and regulation, although the pace of regulation is often pushed by the lobbying power of concerned industries and effective enforcement. First, there is an understanding among policymakers that the current regulations are inadequate given that consumers themselves are much involved in data collection and use [9, 10, 13, 15, 17, 24]. Second, there are concerns about the enforcement of regulation in the setting when data show increasingly cross-border features and the relevance of regulation is unclear [4–10, 32]. Third, due to social networks and other online services operating like service organizations and presenting themselves as public services while trying to avoid appropriate regulation and legislation, they should be possibly subject to regulation like regular business organizations [103]. Finally, the regulation itself is going through a transformation process when the regulation becomes not only more common but also the spirit of regulation changes [2–10, 17, 103].

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5 Discussion and Contributions In this section, the authors provide a discussion of the wide-ranging ethical implications of Big Data technology in a digital society, followed by the major contributions of this chapter in the literature as well as in general information technology (IT) and business domains. Therefore, in attempts to foresee future organizational environments or business ecosystems, the authors accept the risk as when discussing potential data accidents, the authors use hypothetical scenarios and potential implications. The authors do not intend to predict future data accidents because attempts to predict would be misinterpreting the inevitable and unexpected nature of data accidents. Besides, the authors consider that potential data accidents that can be foreseen can be monitored and mitigated as well. Additionally, the authors emphasize that the term “normal” is used for data accidents to indicate that data accidents are inevitable. Therefore, as the normal accident theory suggests, data accidents have the potential to take place. However, the normal accident theory does not determine when and how these data accidents can take place. The term “mitigation” does not refer to specific instances, i.e. to preventing another data leak, data manipulation, or financial meltdown; but instead, it suggests reassessing basic organizational environments, where normal accidents have the potential to take place. The mitigation strategies must address essential requirements to simplify and decouple these organizational systems, or business ecosystems [32, 80, 81]. The authors focus on the notion of normal accident theory and Big Data technology concerning mitigation strategies. The mitigation strategies require to change both the acceptance measure and the degree of organizational understanding that creates tolerance only when potential consequences of data accidents associated with Big Data technology have been addressed, also keeping in mind that the features of potential data accidents are distinct and uncertain. Therefore, the authors suggest that Big Data technology creates externalities that generally can be influenced by relevant regulatory processes. However, the distinct and uncertain features of data accidents together with technical and commercial limitations associated with Big Data technology, develop challenges for effective regulation [2–10]. Accordingly, the authors demonstrate the notion by using the entire process of updating data protection legislation in the European Union to replace the currently outdated regulation from the 1990s and to standardize legislative approaches to data privacy across the European Union and associated countries [2–10, 21, 71–73, 104]. First, a challenge of regulation across borders has led to attempts to apply regulation to the major, United States-based, social networks. However, this resulted in problems ranging from the practical concerns over the limitations of the remit of national authorities to the threats of a trade war [4–8, 14, 15, 32, 71, 72, 105]. Second, the attempts to regulate the ability of datacentric business organizations to gather data in a format that enables Big Data analysis, i.e. data analytics, have raised issues about the level at which society is supportive or actively opposed to such data

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collection. For instance, if the new European Union regulation could result in Google and Facebook limiting their features or even withdrawing from the European market, how likely the consumers would appreciate improved data privacy for themselves and others or rather criticize the European Union for limiting the scope of their online activities? [2–10, 14, 15, 21, 43, 71–73]. Accordingly, the authors suggest that datacentric business organizations may have to change their privacy-related practices as these look incomplete and, maybe, insufficient to meet the requirements of the new European General Data Protection Regulation (GDPR)—Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons about the processing of personal data and the free movement of such data and repealing Directive 95/46/EC [2–10, 41, 71, 72]. The authors note that there are proposals for different approaches that put collected data at and under the control of the users. For instance, the approach proposed by Tim Berners-Lee with the SOLID project introduces the concept of personal online data stores (pods), hosted anywhere the user desires [9, 10]. Applications that are authenticated by Solid, a decentralized data-linked system, are permitted to request data if the user has given the application permission. The authors also inform that during the COVID-19 pandemic, the large-scale data collection and intelligent analysis must respect data privacy and public trust. Best practices should be identified to maintain responsible data collection and data processing standards at a global scale, and need to be applied to all types of related data collection [19, 66]. For instance, in the COVID-19 reality when contact tracing of people is implemented to trace contacts with people found positive or suspected of having the virus, which is among key strategies to contain the spreading, it is important to maintain data privacy principles while establishing contact tracing procedures as part of COVID-19 detection. Therefore, the main data privacy aspects should be consent, transparency, purpose limitation, proportionality, and security safeguards [2–10, 19, 22, 23, 66]. The term “consent” is used to obtain agreement on providing, when required, contact tracing data to collection points, in the same way as forms or employee declarations. The term “transparency” is used to inform of how data can be used as part of the contact tracing process. The term “purpose limitation” is used to notify that personal information will be treated in strict confidence and can be used only for the purposes to identify people to who the virus may have spread. The term “security safeguards” is used to ensure that security measures are taken to protect personal data from being shared unnecessarily or leaked. Implementing these measures would support a secure contact tracing process and help maintain data privacy on a global scale [2–10, 19, 22, 23, 66]. However, the authors are worried about data security problems when private data could be exploited by malicious actors and stalkers. Private data can be anonymized and encrypted, but these are not sufficiently secure measures to protect private data that is stored in a centralized location and accessed remotely. Additionally, there is a chance of spoofed versions of contact-tracing software to be distributed. For instance,

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agreements with Apple and Google can mitigate the issue but cannot eliminate the problem [2–10, 19, 22, 23, 66]. Given the current understanding of COVID-19, contamination can occur up to two weeks before people become symptomatic and can be transmitted via objects and air. To preserve privacy, not only the access to but also the retention time of contact data should be respected; contact data must be deleted after a recommended time keeping in mind the incubation time and the resulting delay in discovery of possible virus transfer. Moreover, the private data can be used for other purposes, for instance, by intelligence agencies. In normal circumstances, such invasive contact tracing would be unacceptable. However, a temporary increase in surveillance should be tolerated representing a compromise between privacy and public health to safeguard public health, public health infrastructure, businesses, and business ecosystems [2–10, 19, 22, 23, 66]. Third, the insight into implications of Big Data technology has become more challenging due to the issues of data ownership, i.e. the rights to use data after datacentric business organizations have it collected [2–8]. The ownership typically depends on the method by which data has been collected, and the on-going discussion in terms of regulation aims to address asymmetries that are present here [2–8, 17, 32, 71–73]. For instance, when people sign up for online services like social media, they provide a “blanket consent” that their private data can be used for a frequently unnamed range of purposes for an unknown length of time. Such sign-ups represent a legal consent that permits the use of data and, basically, the ownership or at least the right to use and trade for the entire length of time as these people remain the members of these online services. However, the use of data by these online services unlikely meets the requirements of traditional academic research that is based on informed consent [2–8]. For instance, the continued use of collected user data after ending the membership is an issue that should be properly resolved. Additionally, while people expect to have at least limited ownership rights on personal data directly collected by datacentric business organizations, another important issue with Big Data technology is autonomous data collection. For instance, the commercial value of data gathered autonomously by sensors in the cars, houses, and public buildings cannot be promptly understood even by datacentric business organizations themselves [2–8]. Additionally, the ownership discussion over commercial data can be unrealistic as people may not know that personal data has been collected. Fourth, the authors underline the need to know if the collected data is personal data or not. This issue is very important as data protection legislation typically does not provide the rights over personal data to people after it was aggregated and anonymized. here [2–8, 14, 17, 32]. Fifth, the authors note that a paradox of Big Data technology is that the methods to anonymize datasets, can be also used to deanonymize the same datasets. This paradox creates further ethical issues associated with both data privacy and data ownership that earlier did not exist. Despite data anonymization and unlike in traditional data analysis that aims to produce aggregate insights, the commercial benefits

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of Big Data technology are heavily driven by the need to analyze personal data here [2–8, 12, 15, 17, 21, 32]. Besides, the authors recall the ethical issues related to the COVID-19 pandemic data collection and resulting interpretations and extrapolations. The concern is that since authorities approved the COVID-19 data manipulation given incomplete data collection and limitations in its interpretation that impact both the derived decisions and public opinion, then how society can expect that commercial applications of Big Data technology would not suffer from similar situations. Sixth, the authors suggest that the following two mitigation strategies should be considered. One approach is a behavioral transformation in datacentric business organizations addressing the wide-ranging ethical implications of Big Data technology discussed earlier in this section. Additionally, the authors remind about a difference between the major industrial companies with commercial strategies in general and those datacentric business organizations that have data collection and analysis as a goal. Therefore, another approach is to change the focus of the industrial companies that do not plan to become data conglomerates away from Big Data technology. Seventh, the authors inform about an issue related to the role of consumer behavior itself. For instance, datacentric business organizations like Google and Facebook have already transitioned to the philosophy that at some level respects the value of data privacy in consumer decision-making [2–10, 32]. Additionally, the literature suggests that consumers consider data privacy and security before they share personal data online, especially with fishy strangers [16, 106]. Therefore, given the commercial drivers behind Big Data technology, this mentioned in the literature decreased consumer tolerance to online data collection indicates the potential to move away from the Big Data economy [9, 10, 12, 14, 32, 53–55]. The authors recap that the normal accident theory has potential limits for its effective application to data accidents associated with state-of-the-art and emerging technologies discussed earlier. The first limit is that normal accident theorists seemed to be partially wrong in the past, especially with the Y2K scenario [43–45]. However, this was not a weakness of the normal accident theory. On the contrary, this was a result of attempts to use the theory to predict future data accidents and prevent potential consequences instead of an effort to explain. In his defense, [41] underlined that many researchers did their analysis of emerging technologies wrong. Therefore, the Y2K scenario demonstrated challenges introduced by the risk analysis produced by researchers without a sufficient understanding of the distinct features of these emerging technologies [4–8, 32, 41]. The second limit is related to a view that construct “Big Data” should be used only for reference purposes. The literature also suggests a different view that construct “Big Data” is an ill-defined phrase with an unclear and confusing application that creates an association with technological advancement without the need to properly understand its nature [9, 10, 13, 15, 17, 18, 107]. The authors consider the use of the term “Big Data” has currently surpassed its understanding [4–8, 32]. However, the term emerged from a practical need to recognize a transformation in data collection and analysis processes that already took place in a digital society [2–10, 17]. Therefore, in this chapter, the authors used

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the term when they discussed the organizational strategies and new organizational behaviors in business ecosystems to address the wide-ranging ethical implications of Big Data technology in the digital society instead of inventing new terms [108]. Finally, this chapter makes the following major contributions in the literature as well as in general information technology (IT) and business domains. First, the authors investigated the wide-ranging ethical implications of Big Data technology in a digital society. Second, the authors determined that strategies behind Big Data technology require organizational systems, or business ecosystems, that leave them vulnerable to accidents associated with its commercial value and known as data accidents. Third, the authors established that data accidents have distinct features and raise important concerns about data privacy in a digital society, particularly, in the time of the COVID-19 pandemic. Fourth, the authors created a classification of potential data accidents and proposed successful risk mitigation strategies.

6 Conclusion In conclusion, the authors note that exponential growth in the commercial use of the Internet has dramatically increased the volume and scope of data gathered by datacentric business organizations. Big Data emerged as a term to summarize both the technical and commercial aspects of this growing data collection and analysis processes. Previously, much discussion of Big Data was focused on its transformational potential for technological innovation and efficiency. However, less attention was devoted to its wide-ranging ethical implications beyond generating commercial value. In this chapter, the authors investigated the wide-ranging ethical implications of Big Data technology in a digital society. The authors informed that strategies behind Big Data technology require organizational systems, or business ecosystems, that leave them vulnerable to accidents associated with its commercial value and known as data accidents. These data accidents have distinct features and raise important concerns about data privacy in a digital society, especially during the COVID-19 pandemic. In this chapter, the authors suggested classification and methods mitigate the risk of potential data accidents.

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Application of Business Rules Mechanism in IT System Projects Sylwester Balcerek, Vincent Karoviˇc, and Vincent Karoviˇc

Abstract This work deals with the use of the mechanism of business rules in information systems. It facilitates the implementation of business logic, which is expressed in the form of precise and legible rules. The work is divided into two parts. The first part, consisting of two chapters, deals with the approach to business rules based on the literature studies. It presents the advantages and disadvantages of applying the idea of business rules. The second part of the work deals with the practical use of trade rules mechanisms. Within this part, the BiblioRule information system was designed. The aim of the BiblioRule system is to improve the functioning of the library. BiblioRule allows library administrators to easily modify selected requirements. BiblioRule was implemented in Java. It uses the components of the JBoss Drools platform, Drools Expert as a rules module and Drools Guvnor as a business rules management system. Keywords Business rules · IT systems · IT projects

1 Introduction The use of information technology in the modern world is undoubtedly a common occurrence. While most people may not be aware of this, computer systems help people implement many activities. The range of their applications is very wide, from systems controlling technological processes in factories, through systems supporting the work of bank branches and ending with tool applications such as laminating S. Balcerek Lodz University of Technology, Lodz, Poland e-mail: [email protected] V. Karoviˇc (B) · V. Karoviˇc Faculty of Management, Comenius University in Bratislava, Bratislava, Slovakia e-mail: [email protected] V. Karoviˇc e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_2

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foils. The process of creating information systems is very often a complicated action. Application designers and developers face many challenges, among which the problem of changing requirements for IT systems is very important. The source of these changes is often the user or customer of the software being executed. To meet the new requirements, system developers must modify previously created procedures and adapt them to the current needs of the user. It is often a complicated and time consuming activity due to the complexity of the architectural design of the system. Additional problems can occur when it turns out that system designers have not understood exactly what the client is waiting for. Therefore, in the development of IT systems, a solution is sought through which the development becomes flexible, with an uncomplicated procedure of entering new requirements. An important factor will also be the development in a clear and legible way, which will allow all parties interested in the system to specify the requirements precisely. The use of the business rules mechanism in the design of an IT system may prove to be a solution to the above problems. It is a technology whose use can bring benefits, especially where the requirements of the logic of the IT system are changing dynamically. It is also very important that users of terms called business rules can define their requirements without requiring the participation of a programmer. This work deals with the topic of using mechanisms of business rules in information systems. The theoretical assumptions on which this technology is based were analyzed. In addition, a description of the practical application of the business rules mechanism was created based on the IT system project implemented as part of the work.

1.1 Objectives and Scope of Work The aim of this work is to analyze the application of the mechanism of business rules in IT systems projects. The results of the analysis will be used, inter alia, to create a prototype of an IT system whose business logic will be based on the use of a business rules mechanism. The created application is then assessed for compliance with the concept of business rules. An equally important goal is to review and evaluate the possibilities of integrating business regulatory technologies with other technologies and IT tools.

1.2 Composition of Work The first chapter contains information on the theoretical foundations on which the technology of enterprise IT systems is based. It includes a discussion of the concept of corporate rules, the definition of the concept of corporate rules, as well as the advantages and disadvantages of using the corporate rules approach.

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The second chapter deals with the technological side of the concept of business rules. Here you will find, among other things, a description of the business rules management system, as well as an overview of several products designed to work with business rules. The third chapter describes the business rules mechanism and business rules management system called JBoss Drools. The information contained in this document provides a better understanding of the technology. The fourth chapter presents a description of the IT system project implemented in this work. Reports were presented regarding the requirements of the proposed system and a description of its architecture. The fifth chapter describes the created IT system and analysis of the use of the mechanism of business rules in its design. The summary contains the conclusions resulting from this work. An assessment was also made of the application of business rule mechanisms in information systems.

1.3 Review of the Literature The literature on this topic can be divided into two main categories: the first deals with the topic of trade rules, and thus theoretical issues, and the second deals with the practical use of the trade rules mechanism. The literature on the concept of business rules contains books. All works used in the work are written in English. They deal with the theoretical foundations of business technology. The second category includes books and electronic resources that include websites and articles published on those websites. As mentioned above, this part of the literature is also in English. It contains many valuable tips for creating business rules, configuring the business rules mechanism, and integrating it with other information technologies.

2 The Concept of Business Rules in the Context of Software Development The implementation of a business activity requires many decisions regarding various aspects of the problem being solved. Which solution is chosen depends on many factors, such as legislation or customer needs. Entrepreneurship requires flexibility in action and a quick response to change. Software that helps with the implementation of the project must also meet the stated objectives. The success of a business largely depends on the extent to which IT systems meet the needs of the business. The concept of business rules in this chapter is an example of an idea to ensure the best match between IT tools and business requirements.

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2.1 Outline of Problems in Creating IT Systems The IT system that supports or enables work is today one of the most important elements of various types of organizations, with a special emphasis on e-business oriented businesses. With the growing competitiveness of IT systems, newer and higher requirements are set for their creators, which should be met as soon as possible, without compromising the quality of products. However, it turns out that these two requirements do not have to go hand in hand and may be mutually exclusive. The creation and development of information systems is a complicated and often longterm process, which takes place in several stages. In general, we can distinguish the following phases [1–4]: • analysis of system requirements—includes, among other things, understanding the needs of the user and creating an analytical model that specifies all required functions, processed data and constraints imposed on the performed functions, • system design—aims to create a system diagram, by transforming a technologically independent analytical model into a model describing the details of the program design; defines the data structure and cooperation of system elements in the context of selected information technology, • implementation—transforms the design model into work program code by creating, connecting and running all system components, • verification and approval—checks the correctness of the program execution and the correctness of the obtained results and also checks whether the created product is in accordance with the client’s expectations, • maintenance—contains changes that may occur after the system has been put into operation, such as the removal of previously undetected errors. An important point of work on the development of the system is the creation of its architecture, which defines the division of the system into specialized parts responsible for specific tasks. Parts of the system with a similar purpose form layers characterized by a certain independence between them. This means that each of the program layers can be analyzed and developed independently, without affecting the elements of the other layer. The three-layer architecture is most often used in information systems (Fig. 1), which store layer separation in the created systems: • presentation—its main task is to present data and enable interaction with the user, • logic—is the core of the whole system, the place where all processes are performed and decisions are made, • data—responsible for data storage, processed in the system. Each of the layers is implemented using technology suitable for that layer. For the presentation layer, this can be, for example, JavaServer Faces or ExtJS. Java EE or.NET technology can be used to create the logical layer, while a database management system, such as the MySQL or PostgreSQL layer, can be responsible for the data layer.

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Fig. 1 Schematic representation of a three-tier information system architecture

Of these three layers, logic is particularly important because it reflects the needs of future users. This reflection is a business process which, according to [1], is “a defined and repetitive operation of an organization, described by a series of steps with a known method of starting and ending, leading to what valuable results are”. Because of the responsibility of the logical layer for performing these processes, it is often called the business logical layer. The requirements for the business logic layer change more frequently than the requirements for other layers [5]. One reason may be a change in customer needs

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that will force the introduction of new features into the system or existing changes, and the logical layer is important for these activities in terms of system architecture. Changes in IT system requirements are a natural process of software development. The reasons for the changes can be various—errors highlighted in the previous stages, which limits the lack of resources needed to meet all the requirements or the above changes in customer needs. However, any change destabilizes the software development process and can be a source of high costs, making working on the system more advanced. Cooperation in the period of dynamic development of IT systems places demands for the implementation of business changes in the systems in the shortest possible time. No manager wants to be ahead of the competition by offering another product with more functionality. At this point, programmers and system designers will create a non-trivial task of modifying the system while meeting deadlines. However, these requirements are not always met, because during the process of adapting the system, they are shown that the created project is not as flexible as it seemed in the initial phase of the project. It should be clear that the changes currently being introduced in the program may not necessarily be appropriate in the future and it is likely that the system will be subject to improvement and adaptation to market needs. In such a case, it is worth considering using a different approach or a different methodology for software development, which will allow changes to be made in a short time and without the need for a large intervention in the logical code of the system [6–8].

2.2 Arguments for Finding New Solutions in Software Development At present, business in the broadest sense of the word is inextricably linked to computer technology. Depending on the type of project or design, the connection is stronger or weaker. An important aspect of this collaboration is the proper flow of information between the company’s management, the client, and the designers and programmers. It is necessary to clearly state who will be responsible for the implementation of the requirements. It often happens that information about the functioning of the IT system in the organization is not generally available and only a certain group of people or, in the worst case, only one person has access to it. This can lead to many problems, starting with a lack of general understanding of what the system implements and how, ending with a huge mess that occurs when the person responsible for the system has to stop working with it for some reason (e.g. illness, dismissal) [9–11]. Access to knowledge is only needed for a small group of people. Knowledge that is not structured in any way and available to others is, in principle, of little use. In addition, if information about the requirements of the system exists only in the minds of the designers and not in the form of clearly defined expectations, then there is a high risk that the created product will not achieve the set goals. One tends to

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simplify work, and the lack of clearly written requirements undoubtedly causes such temptations to programmers. The phenomenon of poorly defined specific requirements and the lack of understanding for the parties involved in the business are not the only problems that appear on the way to achieving the goal of the organization. If you look at the problem only from the IT point of view, it may happen that the IT system is not well designed. This is reflected in the fact that changes in the business logic of the program are cumbersome, laborious and time consuming. The close links between the layers of the system, the rigid coding of business rules and processes that make them dependent on many other elements of the system and their dissemination across many modules make it a great challenge for the maintenance and development of such a system. The above factors appear to be a sufficient reason to look for new, effective solutions in the design and use of information systems. It is necessary to take into account both the business aspect, i.e., inter alia, the specification of requirements, their analysis, information flows, as well as the IT aspect, which means the use of appropriate technologies, the introduction of changes in the system in response to dynamic changes in requirements.

2.3 The Concept of Business Rules Informatics, and especially one of its areas, which is software engineering, is a scientific discipline that has been developing very dynamically for several decades. This development is often influenced by the imperfections of existing tools, high competition in the manufacturer’s market, as well as the finding of IT applications in various areas of life. Advances in computer science are also supported by the emergence of new ideas for the software development and maintenance process. In this chapter, we will address one such concept of business rules.

2.3.1

What is the Concept of Business Rules?

The activities of business organizations are based on a set of specific requirements that should be met during product development in such a way as to meet their objectives. Requirements are defined at the enterprise level of the enterprise based on the collection of customer expectations or market analysis. Based on the information obtained, designers and programmers then prepare an IT system that meets the required requirements. In view of the arguments presented in the previous section, it can be assumed that the above scenario is often too optimistic. One way to circumvent these barriers may be to use a business rules-based approach in the software development process.

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The concept of company rules according to [12, 52, 53] consists in a formal way of managing the company’s requirements, which are expressed in the form of specific rules. In other saunas, the discussed approach representing knowledge of the problem in a form well known in the field of artificial intelligence is the rule [15]. The expected operation of the system is determined by a set of such rules defining corporate policy, defined by corporate managers. Answers to the question of what the concept of business rules is also provided by von Halle [12], who argues that it is a methodology as well as a special technology through which rules can be managed, disseminated, automated and changed in line with the organisation’s business strategy. These seemingly simple statements have implications for the software development approach. The notion of business rules strongly rejects the disclosure of the knowledge contained in the rules only to programmers and keeping them in the program code, from which it will be difficult to get them other people involved in the implementation of the commitment meet the needs of the client. To summarize the answer to the question posed in the title of the subsection, it is worth emphasizing that» in the business rules approach, rules are used to represent requirements. They should be expressed in a clearly defined and comprehensible form. It is also assumed that the expression of the rule in the IT system should be more direct and not part of the code. In addition, the aim of the business rules approach is to allow system logic to be determined not only by programmers but also by people who are most involved in the practical use of the system, i. J. Organizational or human resource managers.

2.3.2

History of Ideas for Business Rules

The idea of a business rules concept was born in the first half of the 1990s. At that time, the first framework of this approach was outlined, while in the late 1990s, technologies related to this topic began to emerge. However, the beginnings of information systems based on the representation of knowledge in the form of a rule should be sought earlier, as the first professional systems were created with valid force in the 1970s. Business rules were not created in response to the emergence of a new class of software specifically designed for knowledge management. This concept is based on the work of experts who have experience in creating systems for business needs. Their aim was to develop business solutions that enabled automated transparent requirements management using appropriate information technologies [16]. The work related to the concept of business rules is inextricably linked with the Business Rules Group, an independent non-profit organization. It deals with the formulation and development of standards related to business rules and the relationship between these rules and the way the organization and organization of IT systems. During the work of the group, several documents were created that introduced and formalized the subject of the business rules, including: “Defining Business

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Rules—What Are They Really?”—the first publication issued, or the “Business Rules Manifesto”, a document describing the requirements of the business rules.

2.3.3

Characteristics of the Idea of Business

An IT system designed in accordance with the business rules approach should fulfill several functions that will facilitate its creation and use. The rules to be introduced in this system should have several important elements, for example [12]: • Separating the rule from other components rules should form an independent element of the system. In this way, the change forces the system to be reworked, but only changes the rule. The separation of rules represents this advantage and you can manage them yourself without any problems with the program code. • Enhancements to the rule expression should be made in an understandable format, preferably despite technical constraints, so that you can immediately state “what” is intended for the rule. The provisions of this rule shall make them available to any person participating in the undertaking. • The appropriate arrangement of rules should take into account the rules in the IT system so that they can be easily and quickly modified if necessary. This condition is implemented using technology designed for this type of task, such as business rule mechanisms, that allow software to be managed according to established rules and defining rules without the need to modify application logic. • Rule mapping Representation of business requirements in the form of IT-managed rules. It is important to maintain the correct reflection between the “high-level” client request and the implementation of the “low-level” rule.

2.3.4

Advantages of Using Business Rules

Many advantages of using business rules in building information systems are mentioned in the literature. Among them, it should be emphasized [12]: • the rules of simplicity—are well-understood statements for people who do not face technological problems; clearly reflect the functional requirements of the system, • less complicated system architecture system designers do not have to focus on creating complicated and flexible solutions, because they have such functionality provided by the use of specific technology that allows enforcement of rules, • slight changes to requirements—dynamic requirements can be reflected in the system without the need to interfere with software code, • easier access to specifications—information on the functionality of the system is not hidden in its code; By placing a rule in the rules archive, the requirements

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Fig. 2 Benefits of using business rules—accelerating the implementation of new requirements (based on [15])

are achievable for all team members not only for the programmers who create the system, but also for the people who deal with the business side of the company. • Rapid adaptation of the system to change requires the use of a corporate regulation engine significantly reducing the time to modify the system and achieve the desired effects.

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A graphical representation of some of the advantages of the business concept is shown in Fig. 2. It should be noted that the process of introducing new requirements is much shorter if a business rules approach is used.

2.3.5

Disadvantages of Access

Like any concept, it has certain disadvantages. In [5, 17] and [18], attention has been paid to the disadvantages that may be associated with the use of a business rules approach. The most important postulates against this approach are: • Difficulties in adapting this approach require a different way of thinking, especially from programmers who will have to express requirements in a declarative way, and not as before, by placing the rule in the program code, • the efficiency of the technology—using the rules engine requires the incurrence of certain costs, such as the cost of effective implementation of requirements, data in the form of rules, • administration and limited interaction between rules—entering a very large number of rules into the system can cause problems with their administration— for example, answering a simple question: “which rule is unnecessary after the introduction of a new policy”; then it is difficult to see that there can be links between such rules, extreme and there are cases, as you know, recursion during data editing due to the mutual influence of the rule on each other, • the problem of the black box—by expressing the requirements in a declarative form the computer gets a command “what to do” and not “how to do it”; can cause, especially for programmers, a loss of control over the operation of software, • Difficulties in analyzing rules and verifying their correctness “This is due to two previous shortcomings” A large number of rules, complicated dependencies and lack of nuclear operation of the system can lead to many problems with determining the correctness of a rule. 2.3.6

Business Rules and Business Processes

Access to business rules is in some way related to another concept, namely I am not a business process. The difference between these concepts is always obvious, and therefore the functions that these concepts represent sometimes overlap in business rule management technologies and business processes. In [19], a business process is defined as a continuous set of activities that is used to achieve a specific result. More emphasis is placed on how the work should be done (“like”) than exactly what should be done (“what”). In this way, a certain difference between rules and processes is evident in that it declaratively expresses a rule, which specifies what should be done, not how. However, the process defines a certain sequence of events that should lead to the achievement of the goal. The result of determining whether a given activity meets certain conditions is the direction of the process.

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Both approaches can sometimes appear to be competitive because they share the same data model and can produce similar results. However, this is not entirely correct. Technologies implementing concept concepts and business processes can work together to increase the efficiency of business management. As already mentioned, the business process determines a set of certain activities, the feasibility of which depends on the fulfillment of certain conditions. This is where the “meeting” of these two concepts takes place. Business rules determine whether an activity is performed or not. Therefore, the rule is a certain element of decision-making in the process—indirectly responsible for which activity should be performed in the following order. What is the advantage of this combination? Specifically, the use of rules allows you to control the process and then change the rules as needed. Based on the findings and rules, rules determines the engine, often through an inference mechanism, the decision regarding the next step of the process. In the event that organizational policy changes and new conditions need to be identified that determine the steps of the process, changing the rule can significantly save costs and time to reorganize the process. As an example of the relationship between the business approach and business processes, a simplified procedure for ordering a product in an online store can be considered. A diagram of this process is shown in Fig. 3. Initially, the data needed later in the process is collected. This can include customer purchase history, sign-in frequency, and other details. In the step “Determining the discount” it is decided whether the customer will receive a discount for the product. For this purpose, the business rules are applied on the basis of the facts gathered and the rules adopted, it is determined whether the conditions for granting a discount are met. It should be noted that these rules are independent of the other steps of the process, they can change at any time when the conditions for granting a discount change. This example shows that business rule and process approaches can work together and be an effective tool to support an organization’s work. However, it should be borne in mind that the rules are not closely linked to business processes, that they may exist in complete independence.

2.3.7

Examples of Use

Examples of implementing business policy concepts can be found in many IT systems. Several were mentioned in [21]. One example is the use in banking systems to manage the mortgage lending process. Based on many parameters (e.g. earnings, domestic value, age of the borrower, previous credit of the spat), the system helps determine whether a loan will be granted. Another example of use is software that works in a supermarket. It helps in managing the amount of goods in the warehouse, on the shelves of the store, it is also useful in predicting customer demand for products in the future. Based on data purchased last weekend, the system may suggest an increase in the stock of the

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Fig. 3 Schematic of an example of ordering a product in an online store (based on [20])

product in stock. An additional feature of such software is the ability to determine discount strategies for customers. Business-based approaches used in specific organizations include: • Cisco Active Network Abstraction—is a system designed to manage network resources. Through business rules, it allows the user to define the logic associated with the response to events occurring in the managed network [22]. • Bank of the West bank, which uses the concept of business rules in the lending process. Bank managers have the possibility to design and implement various lending policies in the form of rules [23]. • California Motor Vehicles Division—is the institution that maintains the California Vehicle Register. The calculation of different types of claims, for example after vehicle registration, is subject to many, often changing, regulations. Using the business rules approach allows for a rapid implementation of a policy specifying the method of calculating fees [24]. • The Singapore Tax Office—the use of technology implementing the approach to business rules allows the Office’s staff to respond to economic and tax changes, as reflected, for example, in the introduction of a new tax calculation policy [25].

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• Route Management System (Siemens)—a system supporting rail traffic management. The different legal provisions in the countries where the system is to be used mean that it needs to be adapted quickly. This function ensures that a business rules approach is validly used [26].

2.4 Business Rules So far, a description of the concept of a business rule and its main features has been presented. However, the very concept of trade rules was treated intuitively and no formal definition was provided. A more or less clear explanation of the concept of business rules can be found in the literature dealing with the approach to business rules. You will examine these definitions in this subsection.

2.4.1

Business Threads

Many authors cite the definition of a business rule formulated in the above—Group Business Rules. This definition can be found in [27], one of the first and most important documents on the idea of trade rules. The purpose of the rule is to control or influence the behavior of this company. rulesa cannot be divided without losing the information “it is atomic (atomic)”. In [12], business rules are defined as a set of conditions that govern business events in such a way that they occur to an extent acceptable to the requirements [12]. An example of such a business event could be the placement of orders. The order cannot be processed until the “acceptance conditions” are met, for example by entering the delivery address. These “eligibility conditions” are set by managers, which they express in the form of rules in which the event can be successful and should not. Cited complement thread with the decision available in [28], which defines business rules as a means by which an organization implements a company’s strategy, organizes policies, and also complies with legal obligations. A remarkable and interesting diary is given by Morgan in [29]. It describes a business rule as a compact statement on certain aspects of an undertaking [29]. It also states that the rule is defined by terms directly related to the company, using common, unambiguous language understood by all parties concerned: »Professionals, business analysts as well as employees who relate to the technical side of the company—architects or system programmers. Graham agrees with the counselor quoted. However, in his book [30] he expands Morgan’s definition. The most important points of this development were that the business rule is indivisible (atomic), correctly formulated and expressed in a declarative way. In addition, the language used to express the rules may contain business-specific terms. The author explains what he means by defining a well-formulated rule; if it is to be used in rule management software, it must be possible to express it “in a way understood” for that program. Graham also draws attention to the important conclusion of the beneficiary from its definition and, in

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fact, part of it, referring to the declarative way of expressing rules, which means that rulesy does not describe business processes, but indicate what activities are allowed during the process [30]. In the book [16], Ross provides several definitions of the term business rules formulated by various authors. Among them are several, of which he is the author. In one of them, he states that the business rule is separate, which allows the policy to be applied to the company. It can be considered as a non-technological requirement and the user, as a non-technical form, which is expressed as a statement, as a nontechnological and non-technical form. It is a statement describing the conduct of the company. Among other definitions given by Ross, it should be noted that they were formulated by Chrisholm [16]. Defines a business rule as a single term that captures data or information that an organization owns and draws new information from or uses to create a particular action. By analyzing the cited descriptions, it is possible to distinguish some characteristic terms. The collection of these conditions can be the basis for drawing up a new definition of business rules that will be most appropriate for the person. Everyone can look at business rules from a different perspective: The business itself or the IT system that supports it, but we should not forget that the rule first stated “what” should be done or “what” forbidden, as opposed to “how” to do it. In addition, it is important to ensure that all stakeholders involved in a rulesa project understand the term rule, which determines the set of decisions that can be made, and that its interpretation by one of the project team members can adversely affect the results of software that supports the project’s decision-making processes.

2.4.2

Manifesto of Trade Regulation

An interesting source of information on business rules requirements is the “Business Rules Manifesto” [31], produced by the Business Rules Group. Contains a list of instructions for expressing and using business rules. It is also a good introduction to the concept of business rules. The current version of the “Manifesto” contains 40 points, which are divided into several categories (articles). The following points are more interesting and worth mentioning: • “rulesy are the most important citizens of the world” (p. 1.1). • “rulesy are direct restrictions on the functioning of the organization and can also support its functioning” (p. 2.1). • “rulesy is the basis of what it knows about the company itself”, ie, the basis of business knowledge (p. 3.4). • “rulesy de lowers the line between measures taken and unacceptable measures “ (p. 7.1). • “rulesy should come from sales representatives” (p. 9.1).

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The examples given from the “Business Management Rules”, as well as other examples not mentioned here, are a good complement to the “business rule definitions” mentioned above and allow a better understanding of the application of the concept of business rules in context. Business management, both commercially and technically.

2.4.3

Class Regulation

Terms referred to as business rules may be subject to classes “due to different criteria. The classes of these terms may be useful in their formulation and analysis. In his work [12], Von Halle cites several schemes of a class of business rules formulated by different persons or organizations, and presents his own view of the class of business rules. The game “this division is shown in Fig. 4. As you can see, von Halle introduces high-level business rules into three subgroups: concepts, facts, and rules per se. A term is a natural word or phrase. Ross clarifies von Halle’s definition of the term [16], emphasizing that the term should have a specific and unambiguous meaning in the context of the undertaking in order to be recognized and cooperation of project implementers. Examples of this term may be: customer’, ec employee’, order’(a term as a term defining a particular entity), customer address’, „employee’s account number’ (a term as a characteristic of that concept), Thursday’(a term value), “working days of the week” (term as a set of values “Mon, Tue, Thurs, Fri”). Fact is an expression which, by combining terms with verbs (hearings) and other terms, expresses a certain important observation. Examples are: “A customer can order,” “A manager is a type of employee,” and “Programmers are members of an organization’s IT department.” Facts and dates can be logical data modeling in the application. They also allow rules to be considered in terms of their meaning “they create the semantics of rules”. The third group in the class of business rules presented by von Halle are rules. Rules are defined here to distinguish the name. The principle is a declarative formulation for which using computational mechanisms» Get new information (fact) or decide what steps to take. Examples of rules are: “Order value is the sum of delivery

Fig. 4 Scheme of business rule classes proposed by von Halle (based on [12])

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costs and product prices”, “The customer cannot order the product until he has paid for the previous order”, “The time to pay for the order must not exceed 14 days”. Von Halle made another division “this time about the principles themselves”. There are five categories of principles [12]: • restrictive (orders)—wording that expresses the need to meet or the need for failure, for example, “Customer can not order more than 10 products at once”, • instructions—wording expressing a warning in relation to circumstances that should or should not be, for example: “The customer should not order more than 10 products at the same time”, • Triggers—Formulations in which the statement of conditions is true initiates a new event, such as “If the ordered product is missing, stop the ordering process.” • computational—formulation, which is an algorithm to obtain the value of a given term, while the algorithm uses mathematical operations (sum, difference and others), for example “The value of the order is equal to the product of the product you tax and the total product price and cost pliers” • request—formulations whose conditions are true lead to the discovery of a new fact, for example “If the customer does not pay the order for 14 days, gets a blocked status”, “if he sometimes has a blocked status”, he can not order more than 5 products at once. The presented classes of “terms”, referred to as business rules, formulated by von Halle, as well as others available in [27, 29] and [16], are intended to make it easier to find requirements and formulate rules. Morgan writes: “It is important not to waste time talking about the” rule of one group or another [29]. Classes are meant to help express clear and well-defined rules.

2.5 Implementation of Business Rules Gaining the benefits of applying business policy concepts requires proper action at two levels: business responsible for defining requirements and IT enabling software to process the rule. In this section, we will look at ways to apply business rules in the field of IT. The book [12] presents three ways of implementing the trading rules in the system. All can be used, but one way clearly outperforms the others. The first way you can express business rules in software is implementation in a database management system (DBMS) in the form of so-called triggers, storage procedures, or other DBMS-specific options. As soon as the database transaction takes place, the rule is executed and possible steps in these rules are taken. The disadvantage of this approach is that it is not possible to easily share the definition of rules between different database systems changing a rule in one system will not change it in all systems. Another way is to express rules as part of the methods in the application code. However, in the light of previous postulates, in particular those which state that rules

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should be easily accessible and not participate in the Code, this approach should be rejected. Apart from this postulate, however, the above method seems to be quite demanding to implement in terms of programming and system design, which requires sophisticated solutions. The third and most interesting way is to use an external software component. It has several advantages over other solutions. These include, but are not limited to: • the ability to manage a set of rules regardless of the processes performed and the data processed, • better performance because» this type of software is designed exclusively for rule processing and management, • the ability to share rules across multiple systems—much like a database can be shared by many systems. This type of software is called a business policy management system (BRMS), business logic server, or business policy module. The surname is not entirely correct, as the rules mechanism is part of the business rules management system. In the book [30] you will find the functions that characterize the BRMS software. These include: • maintaining a rules register, which is a policy set for the company, • the possibility of integration with IT systems supporting the work of the organization, • grouping rules into independent but related files, • draw conclusions on the basis of regular sets, • enable business analysts and even regular users to create rules and policies related to business areas. The use of external BRMS technology is a good solution to the connection problem requiring business and IT limitations. It provides a relatively elegant connection between two perspectives: the implementation of the IT system by programmers and the definition of business processes and requirements by sales managers. Due to many advantages and usability, the third part of the implementation of business rules in the system. An external software component called the business policy management system will be considered later in the work.

3 Technological Aspect of Business Concepts The software development process in modern times is relatively economical. A large number of different types of programming tools are used to implement an IT project, from source code editors, through data modeling programs to application servers. The concept of business rules introduces a new set of tools called the business rule management system. An overview of the characteristics of this type of software is given in the following sections.

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3.1 Business Rules Management Systems The application of business rules in the software development and development process requires the fulfillment of several requirements envisaged by this approach. These requirements were presented and discussed in the previous chapter. However, the most important of them should be mentioned here: • expression of requirements for the functionality of the IT system in a form comprehensible to interested parties • separation of business rules from software code, • The ability to set a rule for people who are not connected to the information technologies. An analysis of the above points leads to the conclusion that the interpretation of the rule by software is only one of many actions that need to be taken in order to achieve the desired results. Mechanisms are needed that allow rules to be stored, modified, and often tested in general for all business policy management operations. The purpose of the mechanisms to be implemented is to facilitate the development of software based on the business rules approach. The mechanisms outlined here that are responsible for implementing many functions are called business rule management systems. Here you will find a description of the functions of the rule management system business.

3.1.1

The Difference Between a Business Rules Management System and a Business Rules Mechanism

However, before describing the business policy management system, it is necessary to clarify some ambiguities associated with the naming of the software that allows the business policy approach to be applied. In the world of information technology, there are mainly two names that describe these business rule mechanisms and business rule management systems. These names are often used interchangeably, except for program types: sometimes different software vendors enter their own names to distinguish them from competing products. The business rule machine is recognized as part of the business rule management system. It allows you to call the procedures responsible for enforcing the rules and determine which rules should be analyzed depending on the context of the operation being performed. Rules engine allows you to compare the data on which the IT system works with defined rules. The purpose of this connection is to obtain the result in the form of a decision to perform or stop the system in the performance of a certain operation, for example by sending an e-mail. At a time when enterprise rule technologies were in their infancy and began to be used, manufacturers’ attention was focused primarily on the rule enforcement mechanism (engine) and algorithms that allow for efficient rule processing, i. an

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assessment of which rules should apply at a given time. Over time, software development has been tracked by tools that have enabled the general understanding of business policy management. Manufacturers of business rule engines have added features that allow rules to be tested, versioned or stored in a dedicated repository [32]. As a result of the increased functionality offered by manufacturers of business rules technology, business rule engines have become one of the elements of a larger business rule management system. The role of the rules engine itself is not yet obsolete, it is the most important element of BRMS systems. Therefore, the use of interchangeable terms does not constitute a major abuse. The formulation of business rule mechanisms in the title of this work can also be interpreted as “business rule management systems”.

3.1.2

Characteristics of Business Rule Management Systems

There is no standard or definition among manufacturers of business policy management systems (BRMSs) that accurately describes this type of software. However, there are some similarities between the main manufacturers’ systems. In [30] Graham distinguishes four main business management rules (Fig. 5): • knowledge base (rule, knowledge base), • motor rules, • rules repository

Fig. 5 BRMS architecture diagram [33]

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Fig. 6 The most important tasks of the business rules engine

• tool set. The knowledge base is an element of the BRMS system that defines what the system knows about the problem it is solving. In other saunas, the knowledge base contains the facts and rules needed to solve a problem. Facts can be represented in the form of relationships between certain objects and characterized by certain attributes. The rules motor, also called the inference motor, is the most important element of the system. Responsible for the interpretation of business rules and actions consisting in the acceptance of appropriate (determined by the rules) actions in relation to the data. It also sets out which rules should be enforced at a given time and in what order. The most important tasks performed by the rule engine are shown in Fig. 6. An important task of the engine rules is to lead the inference process, i. J. Derive new facts based on the current state of knowledge and the rules ensemble. The two most common inference strategies are chaining back and forth. The idea of direct deduction is to make it based on available information rules and facts will generate new facts until the goal is achieved (it is not possible to generate new facts). On the other hand, the retrospective inference process is the opposite of inference. At the beginning there is a clear hypothesis, the truth of which must be proved by proving the truth rules. At present, most trade rule mechanisms allow for preliminary derivation and some of them also for retrospective derivation. Implementing inference in most existing business rule engines now uses the rete algorithm to effectively implement inference. A discussion of this algorithm is given in Sect. 4.2. Another element of the business rule management system that Graham mentions in [30] is the rules repository. Provides rules storage, control, and versioning based on changes made to rules. The repository is often associated with a package that provides permission to access the rule for different systems. The fourth part of the BRMS system is all kinds of tools that help maintain the set of rules, their definition, as well as the runtime environment in which the whole system works.

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In addition to these components, BRMSs often include mechanisms responsible for determining the correctness of rule design, testing and simulating rule enforcement, as well as checking for conflicts between rules, such as whether rules are mutually exclusive. There are also functions that allow to explain how the rules mechanism decided that action should be taken. An important feature of the BRMS system is the fact that the rules mechanism and more precisely its implementation is independent of the rules dataset, t. J. From knowledge of the problem. This means that rule changes do not force changes to the engine code.

3.1.3

Relationships Between Business Rule Management Systems and Expert Systems

It was mentioned in the previous business chapter, the approximation and reasons for the beginning of the concept of business rules management can be traced back to the 1970s. This was the time when the first expert systems began to be created. According to Mulawka, expert system is a computer program that performs costsaving tasks with high intellectual requirements and does the same as a person who is an expert in this field [34]. One of the first expert systems, created in 1974, was called MYCIN. His task was to diagnose blood diseases and make a suitable diagnosis. The principle of operation of this system was based on a dialogue with a doctor, who thus provides the system with specific information. The representation of knowledge in expert systems can take many forms. Rule representation is often used, but in [34] you will find other forms: using semantic networks, computational models, frameworks, or sentence or predicate calculations. Business rule management systems show similarities with expert systems in terms of architecture and operation. When analyzing information about BRMS systems, you may ask whether these are in fact expert systems that have adopted a new name for marketing purposes. In his book [12], von Halle makes five remarks which distinguish between systems BRMS systems expert. Although not all of these views are to be justified, it is worth quoting here. The differences indicated by von Halle are shown in Table 1. Von Halle also emphasizes that the differences between expert systems and BRMS systems are in applications. Expert systems are used for diagnostics, such as consulting systems, classification, evaluation or control of various processes. On the other hand, business rule management systems are mainly used in the field of electronic order management or business process support [12]. Graham disagrees with von Halle’s views. Referring to the above views, the book [30] states that the complex decisions made by an expert system are not as costeffective as von Halle states. He also believes that many of the expert systems involved in the creation required the application of business rules to information from the database. In addition, it also states that all popular business rule management systems have deduction mechanisms, so it is not just the domain of expert systems. Graham

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Table 1 Differences between the expert system and the BRMS system according to von Halle [12] Expert system

BRMS system

Making the decisions you make

Making simple (“everyday”) decisions

They can handle knowledge with a degree of uncertainty

They work on certain knowledge

Reasoning is the main thing a process that uses usually

Rules are not used only for inference, but also for example to face (calculation rules) or perform certain actions (rulesy causing actions)

use of the rule is not binding with database operations

The use of the rule is limited often for surgery updating data in the database

Usually include engine reasoning

Operations based on rules do not require use inference engine

therefore disagrees with von von Halle’s assertion that the rules in BRMS do not apply in inference processes. However, there is one argument put forward by von Halle, with whom Graham agrees that BRMS systems cannot handle knowledge uncertainty. None of the current business rule management systems supports mechanisms to promote uncertain knowledge. As Graham goes on to say, this argument may distinguish BRMS systems from expert systems, but outside of it he sees no significant technical differences [30]. The views expressed by Graham seem very precise. In terms of software architecture, expert systems as well as business rule management systems have very similar components. So you may be wondering if these are just two different names for the same software? The line between these two types of software is very thin. In addition to the above argument that BRMS systems do not support the management of knowledge uncertainty, it may also be important that BRMS systems are not, as in most expert systems, used directly by humans (for example through “dialogue” with the user) but rather by other (external) IT systems. There may be a whole chain of components between the user and the BRMS, so the user may not be aware of the use of such a system [20]. For the purposes of this work, it is difficult to focus on (expert) knowledge of the problems required by systems other than BRMS. However, an interesting extension of this topic may be to examine the application of business rule management systems in the context of issues that are addressed by expert systems.

3.1.4

Interpretation of Rules by the BRMS System

Interpretation of the knowledge contained in the business rules is a key activity of the BRMS system. In most cases, BRMS treats business rules as so-called Production rules. These are terms in the form: IF X THEN Y.

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The first part of this production rule X is called the predecessor, state, or left side—LHS. The second part of Rule Y is referred to as the successor, act, or rightwing—RHS. The interpretation of the rules of production can be done in various ways, for example:—if a certain condition is met, some action is taken—or—if the statement is true, then another can be derived from it [30]. The advantage of using production rules as representatives of knowledge in business rule management systems is that people can easily understand them. In addition, given that each rulesa contains only a small amount of knowledge, the production rules are independent of each other and adding and removing them from the rules database is not a complicated process [30]. Systems based on production rules are called production systems or production systems. A simplified structure of such a system is shown in Fig. 7. The main components of the production system are [35]: • set of fact types—set of user-defined data types (structures, classes); an example of a type of reality can be a home, a person, while the reality itself can be considered as assigning the value of a certain property (field, attribute) to a type of reality, for example: » yellow house, tall person, • working memory—is a type of database or structure in which facts are stored; determines the current state of the system, • production regulation, • production memory (also called Production memory)—also called knowledge base, is a structure that stores the rules of production, its content changes very rarely, • The rule selection strategy—consists of algorithms responsible for selecting a specific rule, which should be activated when many rules meet the conditions contained in the LHS. Currently, almost all of the most popular BRMS systems have the abovementioned functions—therefore they are production control systems. A formal description of the production rules and production systems is given in [35].

Fig. 7 Structure of the production rules system

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3.2 Repetition of the Algorithm The business rules engine, which is one of the components of the peani BRMS system, is a very important task of the mechanism responsible for enforcing business rules. The efficiency of this operation is ensured by using the rete algorithm. This section introduces the operation of this algorithm. The rete algorithm was created in 1974 by Charles Forgie University of Carnegie Mellon University. It has become the basis of common production systems such as OPS5, ART or CLIPS. Currently, modifications of this algorithm are used in many popular rules motors. The word “rete” means “network” in Latin.

3.2.1

Examining the Problem

To better illustrate the problem to be solved by the rete algorithm, an example situation is considered: let the knowledge base contain a set of rules R. In addition, there is a set of facts F in the state’s memory and decide to activate a rule whose conditional portion (LHS) is true. This action takes place in the so-called Inference cycle [35]. The scheme of this cycle is shown in Fig. 8. The most visible and easiest way to implement the inference mechanism is to assign parts of all LHS rules to existing facts (step “Corresponding rules”). Due to the existing facts, the conditional parts (LHS) of many rules can be violated, so it is possible to activate many rules—all these rules are formed into a set of rules A, which are the subject of activation. In the next step (“Selecting a rule to activate”), only one rule from set A that is forced is selected based on the rule selection strategy (step “Activating the selected Fig. 8 Inference cycle performed by the business rules engine

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rule”). As a result of activating the given rule, it is possible to insert new facts into the memory of state F, and therefore the state of the whole system will change. As a result, it may turn out that the conditional parts of the rules remaining in rule set A subject to activation are not welded in the context of the current state of the system and these rules should not be activated. Then the whole cycle is repeated again, followed by reassigning the rule, creating set A and activating a specific rule. The above scenario is not very effective—after each activation of the rules, it is necessary to re-check all the rules based on current facts. Increasing the amount of rules in the rules database or facts in the state’s memory means that the rules mechanism has to perform more actions, leading to low time efficiency. The rete algorithm eliminates the above problem. It is based on two important observations that ensure high performance: • The status memory during the execution of subsequent inference cycles does not change significantly in the setting of control A to be activated. The rete algorithm uses this fact and stores the results of the comparison of rules with the facts from previous cycles. In the case of facts that have been added or removed from the state memory, compliance with the rule is made as a result of the activation of the rule. As the other facts have not changed, there is no need to adapt them to the rules. • Shared conditions—some rules may have common conditional parts; the calculation of the result of such a condition is performed only once, not sequentially for each rule. 3.2.2

Operation of the Exchange Algorithm

The process of operating a rete algorithm can be divided into two phases: the network construction phase (hence the name of the rete) and the phase of performing network activities. In the first phase, a network of connected hoses is built. Such a network takes the form of an acyclic controlled graph. Each of the nodes represents one or more conditions that occur in the LHS portion of the rules. There are several species of snakes [35]: • The bark enters the snake net, receives a factual fact at the entrance and sends it to another snake. • A single-threaded node, also called an A-node or an α-node. It is the only condition that appears in the part of the LHS rule; if the LHS portion consists of several conditions joined, for example, once AND AND OR, then each condition created is followed by several conditions; snake A-snake has its own memory in which facts are stored that meet the state represented by this snake. • A two-threaded snake, also called a B-snake or β-snake. It is used to determine the result of testing conditions that must be met by more than one fact. Hoses of this type have two memory elements—one for each inlet for which the facts are given.

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• The end node is also called the P-node; is a chart sheet. Achieving such a rule means that all the conditions in the part of the LHS regulation have been met. Such a rule is then added to rule set A to be activated. Figure 9 shows an example of a graph generated according to the rete algorithm for two rules: IF X and Y THEN action 1, IF X and Y and Z THEN action 2. It should be noted that in the present case, there is cooperation of hoses with the same condition (X and Y). If such optimization does not exist, the X and Y condition check would be performed twice—separately for the first and second rules. After creating the hacks, the rules engine is ready to perform the next phase of the rete algorithm. The elements are gradually downloaded from the state memory (fact set F) and presented at the network entry to the root, which it transmits to the child branches. If it behaves like “poultry “, if the presented element (fact) meets the state that represents the given Awzieze, then it remembers it in the memory of this node and then goes to the next snake. If the condition is not met, the above is not taken into account these steps. During the next operation of the algorithm, the elements from the state memory get to the B-nodes. These nodes are responsible for limiting the facts that reach their entrances. The annex should be understood as testing one set of facts (received on the first registration) in relation to a second set of facts (received on the second registration). The set of facts obtained as a result of testing at Node B is transmitted to the following subgroups.

Fig. 9 Example of nodes generated according to the rete algorithm for two rules (based on [36])

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If a particular Pact node reaches a P-node, it means that all the conditions of that rule have been met and such a rule can be activated. However, before this occurs, rules is added to set A subject to activation. After presenting the elements from the state memory to the network, the rules engine determines, based on the rule selection strategy, which rule should be activated. However, this process is not part of the rete algorithm itself is an important point among the tasks that the engine educates. Specific choice rules from a set of rules to be activated can be made in different ways, for example: depending on the priority of the rule, depending on the order of the rule in the set, or other criteria. The rules engine activates the rules from the activation rule set until all of them are activated, with each rule being activated once during one cycle of presenting facts in the network. During the process of activating subsequent rules, it may happen that the action of the activated rule modifies (introduces a new or deletes an existing) fact from the state memory. This can, for example, affect other rules in the set of rules to be activated, so that the engine needs to take steps to resolve the situation. In this case, the engine presents the fact in the network and if the correct conditions are met, the new rule can be activated. Activating this particular rule may cancel the execution of another rule that is currently in the rule set to be activated. The engine continues to enforce the remaining rules according to the above scenario. Of course, there can be a situation where an explosion occurs during the activation of the rule, such situations are usually undesirable. The solution to this situation varies depending on the implementation of the algorithm.

3.2.3

Recovery Algorithm—Summary

All currently popular trading rule mechanisms use the rete algorithm or one of its improved variants, which include: rete II, rete III or rete OO. Each of the following versions of the rete algorithm introduces some conveniences and increases its efficiency, but the main idea of the operation is mostly in line with the description in this section. A key advantage of the rete algorithm is that rule checking on network nodes is performed only when facts are added (added or removed). In the simplest (socalled Naive) implementation, in the case of the most modern factual adjustments, all conditions of all existing rules would be checked. Rete thus brings significant time savings in operation. However, the high efficiency achieved requires certain costs. The rete algorithm has been criticized for overusing the memory required to store results corresponding to the conditions represented by network nodes. Due to the significant increase in the number of rules, memory usage is extremely increasing, which may call into question the use of the rete algorithm. However, various new variants of the algorithm try to balance the memory using some implementation solutions [37].

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3.3 Review of Business Rule Management Technologies Business rule management systems are products whose development has been relatively dynamic in recent years. Currently, there are many systems in the software market that implement the assumptions of the business rule concept. Most of them have many similar functions, including creating and managing business rules. In addition, they use the rete algorithm or updated versions of the algorithm. Current BRMS systems have no restrictions on running on a specific platform— there are systems for Windows, Linux and both. Most BRMS vendors use Java, and more and more systems of this type using the.NET environment are appearing. In this section, you will find an overview of the most popular business policy management technologies. More detailed information about the found products can be found on the manufacturers’ websites.

3.3.1

IBM ILog JRules

ILog JRules [38] -rm IBM is one of the most modern BRMS products. It is designed to work in both Java and.NET. It is part of the IBM WebSphere package. The main components of the ILog Jrules system include: • Rule Studio—development environment, which allows decoding and modulation; is based on the Eclipse environment, • Rule Team Server—is a policy management environment that also allows authentication and authorization of rules created for enterprise users. • Decision validation service—a mechanism enabling tests to be performed on regular files as well as simulations of various data, • Rule Execution Server—a runtime environment designed to execute applications using business rules; allows monitoring of the rules processing process using the JMX mechanism; has full integration with Rule Studio and Rule Team Server, • Rules for Cobol—a module that allows you to compile a rule into the Cobol language and use it with older applications created in this language. ILog JRules also has a very interesting tool called Rule Solutions for O—ce. Its great advantage is that it allows business rules to be managed in a way that is understood by users who are not involved in programming tasks. Rule Rule for O—ce is an add-in for Word and Excel—Microsoft. It is integrated with the Rule Team Server, which provides great flexibility in creating business rules. The overall presentation of the components of the ILog JRules package and their purpose is shown in Fig. 10.

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Fig. 10 Main components of the IBM ILog JRules system [39]

3.3.2

Advisor to FICO Blaze

The FICO Blaze Advisor [40] is a tool that provides comprehensive business policy support. Versions are available for Java,.NET and Cobol. The current version of the system is number 6.8. The most important components of the system are shown in Fig. 11. Blaze Advisor is very willing to use in organizations in the insurance sector— about 65% of all applications. The Structured Rule Language (SRL) is used to create the rule. This will allow you to define rules templates and rules itself as close as possible to the natural language. This functionality is implemented using mapping phrases that people use for instructions, using a computer. rules decoding can be performed using the IDE—Integrated Environment, recommended by technical personnel, or using an environment named by the application Rule (RMA) creators [42]. Blaze Advisor has an extensive system of rules versions and rules version authorizations. An interesting feature is the assignment of time validity to the rules—when

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Fig. 11 Components of the FICO flame adviser system [41]

the specified period expires, the rules automatically cease to apply as if they were not encountered. Rules quality control is ensured through rules verification and validation mechanisms. During the verification, the rules are checked to see if the rules are unique, mutually exclusive, whether there are infinite loops, or situations where the logical result is always true or always incorrect. In the validation process, regular tests are performed on a set of test data and the results obtained are compared with those results [42]. To process the rules, the Blaze Advisor system uses the rete III algorithm, which is a property of FICO. The improvement offered by this version of the algorithm is the linear dependence of memory occupancy on the size of the set of rules and data (facts). Blaze Advisor also allows you to use a sequential algorithm to handle rule, which is applied when setting up a rule it is not too expensive and extensive and the exchange algorithm is too difficult for this type of case [42]. An interesting feature offered by the Blaze Advisor system is the ability to simulate changes in army’s business strategies. Historical data collected rm¦ are used for this purpose. Different sets of rules representing different strategies can be used for such data. The analysis of the obtained results enables a more precise determination of the optimal business policy of the given company [42].

3.3.3

Microsoft BizTalk Business Rules Framework

The Business Rules Framework is part of Microsoft BizTalk Server [43]. It is designed to work in a.NET environment on Windows systems. The main modules of the BizTalk Business Rule Framework include:

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• Business Rules Composer—a graphical interface enabling the creation of business rules, their grouping into groups, as well as the creation of forestry used in the rules, which is mapped to the relevant environmental instructions, • Engine Deployment Wizard—allows you to add and exchange rules files in the rules repository, as well as import and export as XML files. • Run Time Rule Engine—environment for processing rules, allows derivation into the future, implements a mining strategy. Testing of rules is enabled by the Business Rules Composer module. During the tests, it is possible to monitor different phases of the procedure: presentation of facts, checking of conditions, completion of a set of rules for activation and activation of rules. In addition to the three basic modules, the BizTalk Business Rules Framework includes a number of tools to facilitate your work and perform certain business policy management tasks. These tools include: • Rules Language Converter—a tool enabling the migration of rules sets defined in one rules language to another rules language; this function is implemented by exporting rules to the business rules intermediate language based on XML format, • Rule Set Update Service—a mechanism that allows you to dynamically add rules without having to rebuild all application code. • Rule Tracking Interceptor—a tool for receiving events from the rules engine; they can be used to monitor the processing of rules as well as to detect errors (debugging), • Authorization devices—module for performing authorization for rules files; you can use it to give different users different access rights (read, edit, delete). A disadvantage of the BizTalk Business Rules Framework may be that it is not available as a stand-alone application, but with the entire BizTalk Server system, which can increase the investment cost of the product.

3.3.4

Oracle Business Rules

Oracle Business Rules [44] is one of the main components of the Oracle Fusion Middleware Suite. It integrates easily with Oracle Business Process Management, which is designed to support business processes. Works in Java environment. The main components that make up Oracle’s business rules are: • The JESS-based regular motor uses the rete algorithm in operation and is compatible with the JSR-94 specification. • Rule author—is a graphical tool (Fig. 12 that allows you to create and modulate rules; programmers can use it to decrypt terms used in rules and mapped to appropriate instructions). Entrepreneurs created in this way can easily use Java or XML phrases to define rules. • Rules SDK (Software Development Kit)—a set of application programming interfaces (APIs), the main task of which is to allow applications to access the rules

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Fig. 12 Creating a business rule in oracle rule author [45]

repository. It also allows you to add additional archives to the system in addition to the default Oracle MDS. You can use RL to define a rule in Oracle Business Rules. It has a format similar to Java. It is interpreted directly by the rules engine, so in the case of dynamic modifications or rule additions, it is not necessary to compile a rules. The RL language replaces the original LESS engine-based JESS engine language. Oracle Business Rules uses the so-called Dictionaries. These are XML files that act as containers for all the information that the user has defined (for example, by the rule author): rules, facts, global variables, and also the data model. which many contradict which rules can and facts. The application can be canceled mutually. All razors are stored in a storage compartment [46].

3.3.5

Free Tools

The above business policy technologies are commercial products. To use them, you need to purchase the appropriate license. The cost of such tools is often very high. However, there are free products in the enterprise technology market that can become a good alternative to commercial products. Free business policy tools include both.NET and Java tools. At present, however, the number of rulesian machines for the Java platform far exceeds the number of engines running in the.NET environment. The two main business rule mechanisms running in the.NET environment are Drools.NET and NxBRE. Both use the rete algorithm in their operation. In addition, they have the most important functions available in commercial products. The other two free.NET control engines are Simple Engine and Flex Rule. They have slightly

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less options than the products mentioned above, but can be used successfully for problems of medium complexity. More free business rule engines have been created for the Java platform. The most famous of these is the Drools product from JBoss. It is a system that is quite advanced in its functionality, and although it is available under a license for free, its capabilities do not differ significantly from commercial products. More information on Drools technology will be given in Chapter “Cost-effective Solutions in Cloud Computing Security”. Other well-known rules engines available in Java are Open Rules, JRuleEngine, JLisa and Hammurapi Rules. These are technologies intended for use in smaller and more specific IT projects [47].

3.3.6

Technology Overview—Summary

All of the above business rules have similar functions. The functions that distinguish these systems focus mainly on the devices offered by the user, as well as on the degree of integration with other technologies. The key factor that can decide to use a given business rule management system is often its price. The above-mentioned paid technologies are products whose price is often increased by the value of the entire package, which also includes the BRMS system. As an alternative to such products, the systems may be made available under free licenses. Their functions, although often smaller than in commercial products, are nevertheless suitable for use in smaller projects. There are also systems that match the capabilities of paid instruments. One of them—JBoss Drools—will be discussed in the next chapter.

4 Design and Operation of a Business Rules Engine on the Example of the JBoss Drools System Using a business rule engine in the software development process often requires a number of decisions. Among them, it is important to answer the question of which of the products available on the market offers the most efficient function at a reasonable price. An alternative to paid products are systems developed as part of the Open Source movement. Use of this type of software does not require the payment of license fees. The functionality of such systems is often comparable to commercial products. A business rules management system called JBoss Rules, Drools, also found» is one of the best—known representatives of business policy technology, available under the free ASL license—Apache Software License.

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The extended functionality and free license of the Drools system decided to use it in the practical part of this work. This chapter discusses the most important elements of this technology.

4.1 Basic Information About the Drools System The beginnings of the Drools system date back to 2001, when a never-released version 1.0 was created, using a “naive” implementation in line with reality. In the next version 2.0, the rete algorithm was used, which would undoubtedly improve its performance. The development of Drools from a common business policy management tool to a business policy management system has been in place since version 4.0. It was the basis for the creation of version 5.0, which was named by the creators of the Business Logic Integration Platform. It consists of four components (Fig. 13): • • • •

Drools Expert—modules forming the correct engine of business rules, Drools Guvnor—module responsible for managing business rules, Drools Flow—modules that are a workflow tool used to model business processes, Drools Fusion—event processing module—complex event processing (CEP).

All these modules have a very good integration, which means that the selected combination of tools can be applied to a specific problem to achieve the best solution [5]. Given the topic, the use and discussion of the Drools platform in this work focuses mainly on the use of modules Expert and Guvnor, which are a system of managing business rules. Fig. 13 Drools platform components

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Drools System Architecture

The JBoss Drools package was created and developed for the Java environment. The above-mentioned Expert and Guvnor modules must be used to use the business rule management system. The architecture of the system using the BRMS Drools system during its operation is shown in Fig. 14. As you can see, the system works on two application servers—one of which provides services for the user application, while the other for the Drools Guvnor application. The user’s application uses the business rules engine in its operation, which is responsible for making decisions based on the facts in the system. Drools Guvnor, on the other hand, is responsible for storing, versioning, and validating business rules. The names drools-core, drools-compiler and drools repository indicated in Fig. 14 are the names of the library packages that are responsible for enforcing, interpreting, and translating rules. The name Jackrabbit in Fig. 14 stands for Apache, which uses the Guvnor module as a rules repository [48]. Each of the four elements of the Drools platform can work independently of the others. Also in the example shown in Fig. 14, the creator of the system could limit himself to using the rules engine itself—Drools Expert. However, if it is desired to use the entire BRMS system, you should also use the Drools Guvnor tool. It should be noted that the architecture of the system (Fig. 14), which uses the BRMS Drools system, is complementary to the structure of the Business Rules Management System (BRMS), mentioned in Sect 4.1.2.

Fig. 14 System architecture using BRMS Drools

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Control Formats in the Drools System

The use of business rules requires the introduction of certain rules that apply when creating a rule. These rules define the rules—so that the information contained in the rules can be correctly interpreted by the computer. The Drools package allows you to denature business rules in several forms: • DRL format, • DSL/DSRL format • decision tables. DRL format. Rules stored in DRL format are called technical rules. The reason for using this name is that the rule in this format is intended primarily for people who have practical experience with software development. An example rule saved in DRL format is shown in Fig. 15. The first line after a keyword rule is the name of the rule, like Java classes, are grouped into packages. The rule name must be unique within the package. Everything between the keywords then and then (except for the notes marked with the symbol) means the state of the rule, the fulfillment or rejection of which has the logical value of truth or falsehood. The condition of the rule determines the pattern that should be met in order for the action to be performed. In the given example, the existing facts in the rules engine match the rules with the rules—first it checks whether the given fact (instance of a certain class) is a copy of the class or the name of the Customer attribute. If so, it is still being checked, this copy is worth New Year’s Eve. Fulfilling this condition means that the rule is activated. A rule, which is an action that is performed when a condition is met, is placed between the keywords and then to the end. All valid Java codes can be found here. In the example above, the method call was made using the setPromotion reference on the object labeled $ customer. The consequence of the rule should be simple steps, especially if a statement should not be used here. A new rule should be created instead.

Fig. 15 Example of a rule defined in DRL format

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In addition to using Java code as a result of rules, three fact-modifying expressions can be used in state memory. These include expressions: insert adds a new fact, download removes an existing fact, modifies modifies the properties of that fact. The use of these terms changes the set of facts available, so it is possible that the rules to be activated may not be activated and vice versa [5]. DSL/DSLR format. Formulating a rule in DRL format can be too difficult for a user who is not involved in the software development process on a daily basis. With these users in mind, the developers of the Drools platform have provided a few DSL/DSLR formats. DSL is an acronym for domain-specific language, which can be understood as the language of the relevant area of the problem. The use of DSL/DSLR formats in the rule term consists in the creation of a mapping file in DSL format, which contains a “translation” of terms that the user understands in terms that the computer can interpret (rules machine). The second step is to create a DSLR file that contains rules similar to the DRL rules, but instead using technical language, convenient mappings dated in an associated DSL file are used. An example of a rule saved in DSLR format is shown in Fig. 16. You can easily see that the structure of this rule is very similar to the structure discussed above in DRL format. In this case, however, both the conditional part (line 6) and its consequence (line 8) are easy to understand. In the example from Fig. 16, in the first line, there is a keyword expander that informs the rules engine in which file it should search for mappings of structures occurring in the rules. The rulesa example points to a file named dslrule.dsl. Its contents are shown in Fig. 17. The DSL mapping file contains patterns in which

Fig. 16 Example of a rule in DSLR format

Fig. 17 Example of the contents of a map file «for DSLR format control

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the rules mechanism tries to find one that matches the selected expression. Terms appearing in the conditional portion of the rules (in DSLR) are compared to terms beginning with a label (in DSL). A similar situation will occur for consequences that match the terms beginning with the label [then]. There can be many expressions labeled [reg] ay and [then] in a DSL file. In these examples, the rules search engine searches for term mappings. The customer name is a value, where value means a variable. This expression will, of course, be correctly aligned with the expression from lines 1 and 2 in Fig. 17. Similarly, with an expression indicating the consequence of the rules [5]. As you can see, in order to create easy-to-read rules (in DSLR format), despite all the programmer’s actions, it should be necessary to define a possible expression mapping. However, during the use phase of the system, eligible costs may be demonstrated, especially if the user of the system is a non-technical person. Decision tables. Using the DSLR format to label transparent data is not the only tool offered by Drools platform developers. Another allows you to create rules in the form of decision table elements. The decision-making board is a type of information system. A formal statement of the concept of the decision table is given in [49] and [50]. To understand how the decision table works in Drools, you only need information, and it is a table structure in which the columns determine the conditions under which the decision will be taken and the actions that make up that decision. |. The following lines indicate the values of the subsequent conditional attributes and the selection of one or more actions to be performed after the conditions are met. The Drools platform recognizes decision tables represented in the form of XLS and CSV tables. A sample sheet with rules determining customer discounts is shown in Fig. 18. The conditions listed in this decision table apply to the attributes of the name and age of objects of the Customer class. The steps to be taken once the conditions have been met are to determine the appropriate amount of rebate for the customer. Examples of rules that can be read from the table are: The discount for customers named New Year’s Eve is 15.14 cent and the discount for customers with a permanent duration (at least 18 years) named Anna is 31.67 cent.

Fig. 18 Example of a decision table for the Drools system

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Fig. 19 Congolese congressional terms contained in the example decision table

The use of decision tables requires, as in the DSLR format, some guidance for the rules mechanism regarding the interpretation of the data contained in the table. This information is placed directly in the XLS file. In fact, these are terms similar to those used in DRL rule names. In this example, they were hidden between rows 4 and 8 of the worksheet. Figure 19 shows the situation under consideration. Using decision tables to define business rules in the Drools system can be very convenient, especially if the user handles many rules under the same conditions, but with different combinations of parameters. In other cases, better results can be obtained by using the DRL or DSLR format to create the rule.

4.2 Managing Business Rules Using the Drools Platform As has been emphasized many times, a good BRMS system should have tools that allow, among other things, versioning, testing and offering a relatively simple way to create business rules. On the Drools platform, a tool called Guvnor is such a tool. Drools Guvnor is a web application with a graphical interface (Fig. 19) created by GWT technology. The recommended startup environment is a Jboss application server, but after proper configuration, you can use any other application server or servlet container. Guvnor uses the JCR standard implemented by Apache Jackrabbit to store files. Guvnor offers a number of editors (Fig. 20) with which you can request business rules, each of the above formats for creating a rule has a dedicated editor. Additionally, you can import rule collections that were created in another tool. To facilitate the management of the rules, a categorization of rules has been introduced—each rule belongs to at least one category. It is also possible to assign rules to rule sets to make it easier to determine which rules are currently in use and which are in the testing phase, for example (Fig. 20). Checking the proper functioning of rules offers a test scenario mechanism. It consists of creating a set of rules tests that are performed based on the facts entered by the user. In such tests, it is possible to determine the expected effects in terms of which rules should be activated and what their effects should be. Maintaining version control of rules files with Guvnor means that all changes you make are remembered, and you can restore the previous version of the rule at any time. Guvnor has the ability to specify access levels for individual users for the operations performed. This is an important feature because it ensures that each user can

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Fig. 20 Drools Guvnor interface

only perform operations that are allowed for them, such as reading a set of rules, but not modifying them (Fig. 21). Using Drools Guvnor as a business policy management tool can certainly make it easier to define and maintain the quality of policy files. The undoubted advantage of the application is the ability to easily access business rules from virtually any computer. This is possible through a graphical web interface that is available in most web browsers. However, as the developers themselves admit, in the initial phase of use, the skills of an experienced user (such as a programmer) need to be used to properly configure the required elements, as a non-technical person may not be able to understand how a program works in a short time [51].

4.3 Key Operating Mechanisms of Drools Expert Expert software is a valid business engine for the business policy management system of the Drools platform. It is important that this element is responsible for enforcing the rule and implementing concrete measures. This subchapter describes the most important mechanisms responsible for the operation of Drools’ business rules mechanism. Figure 22 shows the cooperation of these mechanisms.

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Fig. 21 Editors of different rules formats in Guvnor

Fig. 22 Cooperation of the most important mechanisms of the drools expert tool

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Session

Measures taken to implement the decision-making process, such as adding facts to the state’s memory or enforcing a law enforcement order, are carried out within the methods offered by the session. On the programming side, the session is a copy of the implementation of the StatefulKnowledgeSession or StatelessKnowledgeSession interface. The use of the first of these interfaces means that the session used will have the character of a state. This means that between the following prompts to activate rules (fireAllRules method), the appearance of the state memory in which the facts are located is preserved. You will not be required to resubmit facts when you make another activation request memory because they will still be there. Using a state session to interact with a rules engine is especially effective when you require rules activation at certain intervals for events that have not changed or their rate of change is low. Otherwise, adding the same facts would always be a loss of computer resources. The StatelessKnowledgeSession implementation provides a stateless session. This means that the status memory is always cleared between subsequent calls that require activation. Subsequent calls for activation requests must be preceded by the addition of facts to the state memory. The advantage of using a stateless session is that the rule allows the engine to perform better optimization than a state session because the contents of the state memory do not change.

4.3.2

Knowledge Base

The structure in operational memory, which is a magazine for various denominations, used by the rules engine is called the knowledge base. This is an implementation of the KnowledgeBase interface. These definitions include, but are not limited to, rules, fact types, and names of functions that rules can share and use. However, the knowledge base does not contain facts. As mentioned, they are added directly to the session, which can be created using the methods provided by the KnowledgeBase interface. The knowledge base instance should be kept in memory, because creating it consumes a lot of resources, for example, when reading a rule from files. The session does not have to meet this condition—it can be created multiple times.

4.3.3

Dynamic Adjustment of the Knowledge Base

In the previous point, it was noted that the knowledge base is a structure in memory that, among other things, stores sets of rules. As it is created, a rule is added to the knowledge base. However, you may need to modify the rules and apply them to the knowledge base immediately. The solution requires renewing the knowledge base. However, if it is created only once, for example when starting an application, you will need to restart the system, which can cause unwanted downtime.

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The creators of the Drools platform offer a mechanism that avoids such extreme situations. This requires the use of a so-called agent—an object that implements the KnowledgeAgent interface. The agent’s activity is based on a cyclic scan of selected sources in order to look for possible changes that may have occurred since the last scan. The default scan interval is 60 s, but the configuration allows you to select any value. If the agent determines that a resource modification has been made, for example, the rules have changed, the knowledge base is rebuilt. For sessions that will be created after the reconstruction, therefore, the adjusted resources will be taken into account [52].

4.3.4

Bidding Strategy

Chapter “Data-as-a-ServiceVersusInformation-as-a-Service: Critical Differences in Theory, Implementation, and Applicability of Two Growing Cloud Services”, describing the features of the business rule management system, emphasized that » due to the simultaneous presence of several rules to be activated, the rules engine will select additional rules based on the conflict resolution strategy. The Drools business rules engine offers four ways to choose from a rules set to activate. These include: • Priority assigned based on a rule attribute defined in the key meaning, it is possible to set a priority that indicates to the rule engine that the rule should be activated sooner or later than other rules. The higher the value of the protrusion attribute, this rule has a chance to be activated sooner. The default value is 0. • The number of activations that the rules motor checks, how often the rules has been activated before. The higher the number of activations, the greater the significance of this rule. • Presumed rules that impose conditions, such as conjunction rules, are more accurate than single-condition rules. The more rulesa has the conditional part stored, the sooner it will be activated than the others. • Load order In the event of failure of any of the above strategies, the Drools rules engine can determine the order in which control will be activated based on the order in which the rule was loaded into memory. The previously loaded rulesa will be activated before the others. Drools technology allows the programmer to deviate from his own policy selection strategy. In the vast majority of cases, however, existing solutions work well together [21].

4.4 BRMS Drools—Summary As a business rule management system, the Drools platform meets the basic objectives set for this type of instrument. A great advantage of the discussed system is

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its free license, which allows its use in open (open) and commercial projects. Decision tables and an easy-to-read DSL format undoubtedly provide the user with a convenient and simple way to define business rules. A view of the Drools system from the point of view of programming allows us to express the opinion that its use in created applications and integration with other technologies is not demanding. Clear and uncomplicated programming interface—application programming interface, API characterizing the platform, allows to understand the mechanism of operation is a relatively straightforward task. Guvnor can cause some difficulties when using Drools technology as a BRMS, especially if it is intended for use by non-technical users. Due to the many options that this software offers, it can be time consuming to become familiar with this software. However, the rewards are definitely a benefit of using this software. Further views on Drools technology and its practical use for enforcing and administering business rules will be provided in the following chapters.

5 Application of the Corporate Rules Engine in the Design of an IT System Business policy technology, which enables the practical implementation of the requirements of the business policy concept, is an undoubted convenience for users. The creators of the IT system and the people who use it as a working tool will certainly appreciate the benefits offered. On the other hand, using the business rules tool in an IT system is not an activity that solves all the problems you may encounter in the software development process. It should be remembered that for the correct and most comfortable operation of the system, it is necessary to properly configure and integrate the technologies used, which is often a non-trivial task. The practical application of business rules technology certainly allows a new entry into the assessment of the whole concept of business rules. The following chapter provides information on the design of a sample IT system that uses a business rule management system in its operation.

5.1 Problem Presentation When analyzing the activities of the various institutions and organizations, it can be noted that many of them are defined under certain regulations. Such institutions include, for example, banks, courier companies, warehouses and many others. In the case of an IT system that supports the activities of such institutions, regulations are often the first source of business rules that should be included in the design of such a system. The IT system project implemented as part of this work and

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representing the technology of business rules is a software called BiblioRule, which allows ordering, borrowing and returning books. Systems of this type are often found in larger libraries and loans. However, in the implemented application, the emphasis is on the use of the business rules mechanism and integration with other technologies. A rental support system seems to be a good choice for presenting business technology for several reasons. The first is the existence of regulations in such credit agencies, which determine, inter alia, the length and price of the loan, delivery times, the amount of fines imposed for possible infringements. The second reason is the possibility of using such software for different leases, as the use of business rules allows the procurement and rental policy to be adapted free of charge to the requirements of the administration. Another reason is the finding that this type of software does not contain complex logic, making it easier to understand and see how the rules of business engine works.

5.2 Requirements for the Proposed System The requirements for the created system were divided into two generally accepted categories of requirements: functional and non-functional (Fig. 23). Fig. 23 Case diagram for the debtor

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Functional Requirements

The functional requirements that determine the functions that the system should implement are presented using the use case diagrams shown in the drawings 23 and 24. As you can see, these cases were defined for two actors: the creditor and the lending employee. The borrower is any registered rental user. His activities include typical activities that are certainly familiar to people who use some type of rental, such as a library. On the other hand, a lending employee is a person who has the right to rent, receives the return of books and pays fines for violations. Such a person, of course, has the ability to define business rules that define the rules for loans, returns and the like. Among these use cases, the Define Rules rule is particularly important. This is a crucial case because its implementation will allow us to evaluate the use of the business rule management system (Fig. 24). In addition to the functions listed in the diagram, the system should regularly (once a day) check the rental and order dates and send e-mails regarding these deadlines and approaching. Dates book return dates. In addition, rules defined in the DSL format and in the form of decision tables should be supported. Fig. 24 Case diagram for a hired employee

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Broken Requirements

Among the non-functional requirements. Those that do not directly affect the functions of the system are most important to the comfort of use. This is due to the fact that “in a way, the main task of the rules engine is to introduce a little lightness and flexibility into the evolving IT system” and flexibility. The non-functional requirements of the BiblioRule project for the project include: • a simple and intuitive way to add business rules—the assessment of this requirement can be done, for example, on the basis of the time the user needs to train in defining the rules, • enabling dynamic modification of the rule without the need for a “restart” applications, • saving a rule to the business rules archive independently of the application, • performing tests that verify the proper functioning of the system, with particular emphasis on tests that check the results of the operations performed, using the logic contained in the business rules, • providing assistance mechanisms to the debtor during the activities performed in the system.

5.3 Description of the System Architecture BiblioRule is an web application with a graphical interface accessible via a web browser. The architecture of this high-level system is shown in Fig. 25. Users—lenders—communicate with the system through a browser. They can search for books, order orders for selected copies, and perform other operations

Fig. 25 BiblioRule system architecture

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specified in the use case diagram (Fig. 23). This part of the application, intended for lenders, was called BiblioNet. Library staff also perform their activities (Fig. 24) using a browser. However, the graphical interface intended for them is different from the interface for debtors. It is designed to perform typical tasks in the work of a librarian—borrowing, receiving returns, resolving regulatory sanctions and other activities. The name of this part of the system is BiblioManager. Both parts—BiblioNet and BiblioManager—use the same logical layer and are based on the same data model. The logical layer is located in the servlet container, which provides support for the HTTP request. The data model used in the project is shown in Fig. 26. The significance of the individual elements of this model is as follows: • Lenders—represents a rental user who can perform book search, ordering, and lending operations. Depending on the value of areas such as university, faculty, city, and user type, different restrictions apply, such as loan length, based on business rules. The user type field in the current version of the program can have the values: STUDENT, UNIVERSITY EMPLOYER, LIBRARY EMPLOYEES, EMPLOYEE EMPLOYEES and BALANCES. • Book—represents an object that will appear in the search results. Provides a “label” for copies, of which each book contains at least one. • Copy—represents an object that is directly available for ordering and renting. Each copy has a status indicating its availability. Possible values of this field are ON TOP, ORDER, RENT, LOSS.

Fig. 26 Data model of the BiblioRule project

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• Order—means an object created when a Customer copies a given Copy. Using the DataUplynieciaTerminu field, it is possible to determine whether to grant it to the Lender who will order this criminal order. Each Order always refers to one Copy and each Borrower may have a number of Orders. The number of Orders «is determined by the rental managers in the form of business rules. • Lease—represents an object created at the time of physical lending a copy to the lender. The DataUpplyTermin field has the same function as in the order. The loan can be extended, which means that the date of the Termination will receive a new value that is more distant from the previous one. The pre-accession period and the number of prescribed regulations are defined by the lease managers in the form of business rules. • Category—represents an object to which Books on similar subjects belong. Each book can fall into many categories, and each category can have many books. • Author—defines the creator of the book. For simplicity, it is assumed that each book has only one author. • Catalog—represents a collection of books to which individual copies belong. Each copy belongs to only one catalog. In addition, copies of the same book may belong to different catalogs. Possible values in the current version of the program are: STUDENT, SCIENTIFIC, SHORT, FOR EMPLOYEES, MANUAL. Based on the name of the catalog, you can also “specify the length of the order” and the rent. The BiblioRule system uses the architectural pattern REST (a. Representational State Transfer). REST is a style of web application design. It is based on the exchange of nationality information between the client and the server, which means that each client request is independent of the others. The REST pattern is based on the use of HTTP methods—among other things, GET, POST, PUT, DELETE and formats such as XML or JSON are used to transfer data between the client and the server. The key concept in REST-style projects is the source. A resource is a set of information. In the case of a given project, the sources are, for example, borrowers, copies of books, orders. Each resource has a unique identifier, which means its name, and allows it to perform certain operations using HTTP methods. An example of such an identifier is the URL—http://namedomain.com/wypozyczenia/5. Sending a GET request to this address should return all requests from users with ID 5 [53]. The main idea of the REST pattern is shown in Fig. 27. The detailed architecture of the BiblioRule system is shown in Fig. 28. Customer requests implemented using HTTP methods are handled by the controller layer. Drivers use classes of services that are responsible for implementing the basic logic of the system, which is, among other things, user login, creation of order objects, loans, and storage of this information in a database. These services use the services of business rule engines in their operation. It can be identified using the decision service shown in the figure, which is responsible for creating a session (KnowledgeSession), adding facts, and ordering the engine to activate matching rules. To perform these operations, the service only needs to call the doAction method of the decision service, along with a set of facts about which

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Fig. 27 Idea of the REST pattern

Fig. 28 Detailed architecture of the BiblioRule system

rule pairing should take place. After service operations, the relevant data is returned to the client in JSON format. An example of the interaction between participants in the book lending process is shown in Fig. 29. In addition to lending, it is a very important task for lending staff to define the rules that define the regulations, as well as the “procurement policy” and “loans”. These rules are stored in the rules depository and are made available by the Guvnor

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Fig. 29 Interaction process between participants in the rental process

utility. They can be changed at any time because they are used when designing an agent to dynamically modify the rule base.

5.4 Identification of Key Processes The operation of the BiblioRule system supports the support of libraries in the implementation of the most important processes. These include, but are not limited to, the following processes: • • • • • • • • •

reservation cancelation, reporting lost items, extension of the rental period, check of late rental or reservation, new user registration. However, the most important processes are: reservation of copies, borrowing a copy, return a copy. They will be discussed in this subsection.

5.4.1

Reservation of Copies

The copy reservation procedure, which is performed using the BiblioRule system, is shown in Fig. 30. Undoubtedly, it is very readable and does not contain complex activities. The reason for this simplification is the use of the corporate rules engine. Used for an action called Restriction Regulation. Here, the business rules are checked on the basis of the existing facts transferred to the engine. Figure 30 shows some

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Fig. 30 The process of reserving a copy using the business rules tool

examples of business rules that can be activated. It should be noted that adding additional rules does not change the control flows in the process. To better illustrate the rules tool in this process, Fig. 33 shows the same book ordering procedure, but without the use of the rules engine. In this case, all business rules will be replaced by statements of the conditional programming language—if.„ elsewhere.„, It is easy to note that this solution complicates the analysis of the credit process. In addition, if you want to make changes, you must modify the application logic, its source code, and thus resume the process.

5.4.2

Borrow a Copy

The procedure for borrowing a copy performed by BiblioRule is shown in Fig. 32. As you can see, it has a very similar process to the process of ordering copies. In addition, an order removal action is performed in the process to create a credit.

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Figure 33 shows the part of the copy hiring process that should be performed instead of the rules Engine Restrictions Determination action if the business rules technology services are not used.

5.4.3

Return a Copy

The return process begins with the lessor assessing whether the returned item has any damage. This estimate represents a percentage, i.e. it is determined what percentage of the entire copy is damaged. Then all the collected facts (user, loan, damage) get to the rules engine, which performs rule pairing and activation of the selected ones. Figure 34 shows the process using the business rules mechanism. Also marked are examples of rules that the engine can check. On the other hand, Fig. 35 shows the part of the process that should be performed instead of the Check Return Conditions action if the rules motor was not used.

5.5 Technologies and Tools Used in the Project A number of IT technologies and tools have been used to implement the BiblioRule project, enabling the implementation of the above functions and use cases. BiblioRule was implemented in Java version 1.6. Currently, Java is widely used in web application projects, such as BiblioRule. The existence of many tools and technologies that support software development is irrelevant when using Java. The business policy management system used in this project is the JBoss Drools platform discussed in Chapter “Management and Measuring Customer Loyalty in Digital Marketplace—Analysis of KPIs and Influence Factors in CLTV”. The Expert packages as well as » Guvnor were used. The entire BiblioRule application is based on the well-known application framework Spring Framework version 3.0. By using the Spring Framework skeleton pattern called inversion control—IoC, managing dependencies between application components is not a problem. The many mechanisms offered by Spring Framework technology are very impressive and allow you to perform such key tasks in a relatively straightforward way, such as authorization. MySQL software from Oracle version 5.1 was used as a relational database management system. Efficient and fast operation of this system is one of its biggest advantages. Another tool is related to the release of the database—long sleep mode from JBoss version 3.5. It is a technology that implements object-relational mapping, ie the translation of data contained in database tables into the form of objects of the class of the proposed system. The whole application is enabled by the Apache Tomcat servlet container. It is very often used in systems created in the Spring Framework environment, which do not require a complete application server.

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The presentation layer is responsible for the ExtJS library version 3.2. It is a JavaScript library that allows the use of techniques such as Ajax or DHTML. It allows you to create interesting user interfaces available through a web browser. The last two saunas were used to directly create applications. The first is the Eclipse version 3.5 graphical development environment. Due to the many options offered by the programmer, such as extensions to the Drools platform, Spring Framework and many others, Eclipse is very widespread in the IT industry. The second tool, Apache Maven, is a system that facilitates software development, including compilation, testing, or publishing on a server. The undoubted advantage of this tool is the ease of the programmer to manage the number of dependent libraries used in the created system.

5.6 System Design—Summary The development and integration of many different IT technologies is generally one of the conditions for creating competitive software. The BiblioRule system fits into this trend. From the point of view of expanding the development and conservation of the system, the most advanced technology used is the engine of business regulation. The analysis of the processes presented in Figs. 30, 31, 32 and 33 invited the fact that the technology of business regulation will ensure elastic and even in the implementation of the logic of the business system (Figs. 34 and 35). The BiblioRule architecture project has called for a trouble-free and uncomplicated implementation of activities that have taken place in typical workshops: including contracts, the completion of calculations or the resolution of regulatory cards. For the sake of application in the projection of a package not far from the system of the rules repository (Drools Guvnor), the administrators have a convenient way to keep up to date with the principles in the policy library. The application of the system of business regimes has invited programmers to group networks on the various requirements of the designed system, but there are no problems in this case, as well as the preservation of the regimes, and their response to them will always take place. All these requirements and many others are included in the BRMS system.

6 Analysis of the Application of the Business Regulatory Force in the IT System Business regulatory systems are advertised by manufacturers as tools, enabling a viable way to implement business logic in IT systems. Through the implementation of postulates of the concept of business regulation, non-technical users are defining the definition of their system.

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Fig. 31 Copy reservation process without using the business rules tool

The practical use of the business regulatory force in the BiblioRule system has invited the perfect evaluation of the application of this technology and the analysis of the corrections and wages arising from its teaching. This section provides a description of the established BiblioRule system and the information that will be appreciated by the use of the business regency engine.

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Fig. 32 The process of borrowing a copy using a rules engine

6.1 Description of the User Interface The BiblioRule system, as presented in the previous section, has two graphical interfaces, enabling the “performing” of real events “. The first of these, called BiblioNet in Polish (Fig. 36), is for renters. Using the BiblioNet interface, they can perform basic actions: searching for books, ordering and the like. To search for a search, go to the Search Panel (Fig. 37) by clicking on the Search button in the menu on the right side of the screen. The committee will be provided with three categories that can be searched for: the author, title or category. It is also possible to select columns that should be used for research results. The results of the search are presented in the Search Results Panel (Fig. 38). In order to complete the selection of a given folder, you can double-click on the selected items in the search results table. This is due to the search for the Search Panel (Fig. 39), which can be used to check the number of the book and which is available for calculation. To select an example to calculate, click on the mark in the

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Fig. 33 A fragment of the copy rental process without using a rules engine

letter V, placed in the order column. If the user is not logged in, we are currently providing information on both the final and final login. In the event of failure, it shall be forwarded to the Confirmation Panel of the order referred to in Sect. 6.5 (Fig. 40). You can check the status of a user’s account by clicking the Account Balance button in the side menu. Then the panel shown in Fig. 41 will appear. It contains three cards: Orders, Rent and Fines. On the Orders tab, you can view the currently booked items and cancel the selected item. To do this, click the arrow icons in the Cancel column. The Loan tab offers, in addition to an overview of borrowed books, the option to expand selected items. Click the V-shaped icon in the before you run column. In addition to the pre-sale option, you can also report the loss of an item on the Loan tab. This is done by right-clicking on the selected row and submitting a copy of the book. A context menu will appear with the only option Report loss, after clicking on which a confirmation window for book loss will be displayed (Fig. 43).

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Fig. 34 Return process using the rules motor

On the Sanctions tab, the user has the option to review information about sanctions that have been created for violating the rules. Here you will find information about the reason for the sentence (e.g. non-withdrawal of the order, withholding of credit), the date of the sentence and a copy with which the sentence is associated (Figs. 42 and 43). Help panels have been created for all BiblioNet panels that are located on the right side of the screen. Depending on the view the user is currently in, the corresponding help information is displayed. Examples of auxiliary panels are shown in Fig. 44. The second interface—BiblioManager (Fig. 45)—is intended for tenants. It allows you to take actions such as: borrowing and returning books, identifying possible book damage, removing sanctions, and blocking users. To perform the above actions, after clicking the Reader button in the side menu, enter the email address of the selected borrower in the User ID field. Another way to select a user is to double-click on a row in the table in the Users panel (Fig. 46). To open this panel, click the Readers button in the sidebar. After selecting a user, a panel with user account details will appear on the screen (Fig. 47). It contains four cards. In the first, the user information is a summary of the user account. An employee of the rental company may, in accordance with the following tabs of the order, lease and sanctions, duly borrow the ordered copy of the user, accept the return of the copy and financial receivables for existing user fines. These operations are performed by clicking on the icons in the last columns of the tables on the following tabs. It is necessary to add that by clicking on the icon.

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Fig. 35 Fragment of the return process without using the rules motor

A window will appear on the screen (Fig. 48) in which the library employee can determine the extent to which the debtor has damaged the returned copy of the book. A value of “0” means no damage. From the BiblioManager interface level, you can go (by clicking the Manage button) to Guvnor, which allows you to manage business rules. If you want to define new rules or change existing rules, after entering the Guvnor system, you must find the Knowledge Base tab in the side menu and an item called BiblioRule in it. After extending it, options will appear that allow you to modify the rule, define the data model, create test scenarios and much more (Fig. 49). Each entry in a given rule set results in a history entry that can be referenced to restore the previous form of the rule. This is a very convenient feature because it provides the user with convenience and can always return to the most optimal version of the rule.

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Fig. 36 BiblioNet play interface in Polish, designed for those who wait

Fig. 37 Book search panel

Fig. 38 BiblioRule book search results panel

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Fig. 39 Search panel for details about the selected book

Fig. 40 Order confirmation panel

Fig. 41 Panel showing the status of the debtor’s account

Fig. 42 Penalty tab in the user account details panel

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Fig. 43 Book confirmation notification window

Fig. 44 Example of help panels available in the BiblioNet interface

Fig. 45 BiblioManager graphical interface for hired employees

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Fig. 46 Panel showing the list of users who borrow in the BiblioManager interface

Fig. 47 User account details panel in BiblioManager Fig. 48 Window for determining the degree of damage «of the returned item

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Fig. 49 Guvnor menu

To restore a previous version of a rule, in the panel where the rule is being modified, in the menu on the right side of the screen, the Version History tab (Fig. 50). Its extension will list all saved changes that have been made to the rule set. After selecting a version, click the View button below the tab. It will be released then a window representing the previously defined form of rules. To set the current version, click the Restore this version button at the top of this window. For a non-technical user, the first contact with Guvnor may confuse him. The large number of possibilities that this tool offers takes some time to move effectively

Fig. 50 Change history tab and window for restoring an older version in Guvnor

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between the many functions. However, when the user is able to use the Guvnor system, he will certainly appreciate the convenience of hiding behind seemingly complex options.

6.2 Description of the Module for Adding Business Rules The BiblioRule system enables the provision of rental services through the implementation of the most common functions in this type of systems. Another and at the same time the most important functionality in terms of the subject of this work is the ability to define business rules, through which some requirements are expressed. As has been emphasized many times, the Guvnor tool from the JBoss Drools package was used to manage business rules in BiblioRule. Guvnor offers a number of editors that allow you to define rules in DRL, DSLR and decision tables. In order to eliminate any errors that may occur during the creation of rules, it is possible to confirm the created rules. By accurately determining the location of the error, the validation mechanism helps to create the correct form of the rule. The process of creating or editing business rules in Guvnor is not complicated. If you already know about rule formats and rules, creating them in Guvnor is no different from editing a regular text file. To add a new rule or group of business rules, on the Guvnor menu, click the Create New button located on the KnowledgeBases tab and select New Rule from the context menu (Fig. 51). Then a window will appear in which you should enter the

Fig. 51 Window for creating a new business rule

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Fig. 52 Panels with a list of rule files in various formats

name of the created rule, the category to which it belongs and the format in which the rule will be specified. After confirming the entered information (by clicking the OK button), a panel with one editor (Fig. 21) will be displayed (depending on the selected rule format) or a panel that will allow you to send the table in XLS format to the repository (Fig. 5.19). Modifying existing rules should not be difficult. To do this, double-click one of the following items in the BiblioRule drop-down list on the KnowledgeBases tab (Fig. 5.14): Business Rule Assets, Technical Rule Assets, or DSL Configurations. This displays a panel with a list of rules files in DSLR format and decision tables, rules files in DSL format or the configuration of the map «expression« Java into natural language—DSL format (Fig. 52). Double-clicking on the selected row will bring up a panel on the screen with the appropriate editor, in which you can change the rule. Saving a rule to a given package does not mean that it will be possible to use it immediately in the given IT system (for example BiblioRule). For this purpose, it is necessary to create a so-called A view that reflects the status of a given rules package. This approach is advantageous because it is not always desirable to immediately use rules data in the information system. The reason may be, for example, the desire to test the created rules—until a new version of the rule is published, the IT system will be able to use the previous version without any problems. To create a view of the rules package, click on the KnowledgeBases tab (Fig. 49), the BiblioRule element and on the panel that will be displayed (Fig. 20), find the Build and verify section (Fig. 53). First, click the Build Package button to create and confirm the rules package. When you see the package creation message, click the Create Snapshot to Deploy button. A window will appear in which you should enter a name for the created view and click the Create New Slide button. This will create a new view of the rules package.

Fig. 53 Panel and window for creating a view of the rules package

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Using the authorization mechanism, Guvnor allows you to specify the appropriate levels of access to the rule. This way, you can only create a rule for selected hiring employees, while others can, for example, view the rules without modifying them.

6.3 Analysis of Selected Use Scenarios: Defining Business Rules Use case Defining business rules is a key function implemented by BiblioRule. This makes it possible to dynamically implement business requirements and give the user some control over the system. This subsection provides an analysis of selected scenarios for this use case.

6.3.1

Loan Length Specification

In the BiblioRule system, the period for which the book has been borrowed and the number of possible leases for this loan are determined on the basis of business rules defined in the form of a table of decisions. If you want to deviate from the length of the loan, you must download the archive from the Guvnor repository. In the KnowledgeBase drop-down menu, expand the BiblioRule element and select Business Rule. Then the first of the panels shown in Fig. 52 will be displayed. Double-click the row with the name of the loan length. The panel shown in Fig. 54 is displayed. Click the Download button to save the XLS file to your computer’s local disk. For example, to edit a rule, open the downloaded file in OpenOffice Calc. Determining the length of a book loan can be based on many criteria. On the Fig. 55 shows an example of the contents of a table that includes rules governing the rental period. In this case, the city in which the debtor lives, the university in which he studies, the academic degree he may have or the catalog to which he belongs is taken into account. Copy required. If several rules match, only one rule with the highest priority will apply, for example: a student at the Technical University of Łód, called Sylwester, resides in

Fig. 54 Panel for downloading and adding to the rules archive in the form of a decision table defined in the table

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Fig. 55 View of a table in which the business rules determine the lengths of borrowed books

Łódži and pays the debtor. The book from the “student” catalog will correspond to the rules in lines 9, 13, 18 and 27. However, the rules in line 27 have the highest priority (equal to 21) and will be activated, which means» The maximum length of New Year’s student lending and a maximum of two provisional charges may be levied. Adding a new rule to a worksheet takes effect by adding a new row and filling in the values of the appropriate columns. It should be borne in mind that one of the fields in the columns specifying the conditions of the rule and each of the fields in the priority columns, the length of the loans and the number of advance payments must be completed. After editing the rules file, you should add it to the repository. To do this, select the path to access the file in the panel in Fig. 54 (in the Upload new version field) and click the Upload button. Once a new view is created, the rules will be ready for use by BiblioRule.

6.3.2

Determining the Value of Sanctions for Violating Regulations

The business rules, which determine the values of sanctions imposed on users for infringements, as well as the length of loans, are determined in the form of a table with decision-making powers, which are located in the table. The procedure for accessing these rules is the same as the procedure described above, except for the sheet name, which in this case is called the kar value. Figure 56 shows an example of a table in which rules have been defined defining the values of regulatory sanctions. Criteria by which it is determined the value of the fine is the reason for the fine and the conditions depend on the reason: the length of the loan retention and the percentage of damage to the book. These conditions are of a very general nature. But it costs nothing which prevent them from being specified by other criteria. On the to illustrate such a scenario, the

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Fig. 56 View of the table showing the values of regulatory sanctions

case in which the employee will be taken into account libraries want to define the following requirements: Cancellation of an order for students at the Technical University of Łódži results in a penalty of 1. The loss of a book will cause professors to pay a fine of 2 for. To meet these requirements, the table in Fig. 56 should be modified by introducing additional columns, which will gradually determine the type of user account, the university at which he is studying, and the academic degree he has. The changes in the table are shown in Fig. 57. It should be noted that in line 7, the relevant instructions for the rule engine were defined, which allowed it to “understand” the entered data. As in the case of “rental” lengths, only one rule is activated when many rules are adapted to the facts. To accommodate the new requirements in BiblioRule, follow the steps above to add a table to the repository and rebuild the view of the rules package.

Fig. 57 The table containing the changes requires requirements regarding the value of regulatory sanctions

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Determining the Consequences of Maintaining a Loan

In the BiblioRule system, the functionality of an automatic task has been created, which is called every day at a specified time, in order to find loans whose maturity has already expired. In connection with such a collection of loans, the library administrator may impose fines on users who have not met the repayment deadline. The current version of the system implements a rule whose form in DSL format is as follows: the rule "Exceeding the deadline leads to a sanction" when If you did not return the borrowed book on time then A fine is imposed for maintaining the loan, if such a penalty does not exist the end

Of course, it may turn out that creating a fine for the user for keeping the book is not the most accurate way to achieve the consequences, according to the rental manager. For example, the situation where the administrator wants to meet the requirement will be taken into account: If you do not submit the book within the specified time, the user’s account will be suspended. To implement this scenario, the administrator should find a set of rules called DSLR lending, which can be accessed by selecting the following items in order: the KnowledgeBases tab in the Guvnor side menu, the BiblioRule element, the business subgroup of the asset being managed. Then select the row with the above name in the list of rule sets. After opening the DSLR control editor, you need to find the above rule and make changes to some of the consequences. At the beginning, you must remove the existing consequence of the rules. If the credit is withheld, the text A will appear, if such a penalty does not exist, a penalty will be created. Then, in the right part of the editor, click on the bottom icon, which will display a list of terms that can be used as a result of the rule (Fig. 58). You should be on the list select User is blocked and click OK. In this way, the required requirement was defined. The business rule that defines them is shown in Fig. 58. At this point, however, you need to ask what to do if the list of available terms to be included in the RHS section does not have the required term, for example, send the user an email notifying you to return the book. Then you need to create the correct DSL mapping Java to natural. To do this, specify a DSL configuration set called lendingsDSL, which is available in the DSL configuration element, and add a mapping. Its form could be: [effect] [] Send a comment email to the user when returning a book »User u = $ len.getUser (); Book b = $ len.getCopy (). GetBook (); emailService.sendMessage (u.getEmail (), "Feedback", The book "+ b.getTitle ()) should be returned as soon as possible;

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Fig. 58 Change the rules consequences in the DSLR format editor

After saving such an expression, it should be available in the consequence selection list in the DSLR editor. This case reveals two important comments: • Creating the required audio rule in an easy-to-understand format (DSLR) may require the intervention of a programmer, as a non-technical user is likely to encounter a problem in determining the DSL mapping. • The ability to change the behavior of a system without having to modify its source code, and just entering a few instructions into a form on an HTML page is a huge advantage that will undoubtedly save time. 6.3.4

Determining the Ability to Perform Actions by a User with a Status of Blocked

In the previous section, a requirement was introduced that if the book is not delivered within the set deadline, the user’s account will be blocked. This seems like an obvious limitation. However, by more careful analysis, it can be concluded that this does not really contribute to the behavior of the system, because the mere suspension of the user’s account does not mean anything. If you want the penalty for blocking your account to get value, you need to emphasize the consequences associated with it. A situation is considered where blocking a user account involves the following requirements: A blocked user cannot order books. A blocked user cannot borrow more than 3 books. The first of these requirements is quite obvious. However, the second may seem unclear. The point is that when a user’s account is blocked, he or she may currently have a number of orders stored. If he has less than three loans, he will be able to borrow one, two or three books, depending on the current state of the loans. In the case of a larger number of loans, no more loans will be provided.

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The presentation of the business rules implementing the above requirements will be submitted in the DRL technical format this time rulesa reflecting the first requirement takes the following form: "Blocked user cannot place order" rule protrusion 1000 when r: Reservation (id == null, user.userStatus.name == "BLOCKED") then r.setError (true); r.setErrorMsg ("Blocked user cannot place order"); insertion (r); the end

Two terms are notable in this rule: salience 1000 and retrract® . The first determines the priority of the rules. A value of 1000 means a very high priority, so this rule is executed before all others that are activated. The second term mentioned as a result of the rules means that the fact should be removed from the memory, which in this case is the subject of the Reservation class. Removing this fact from the state memory means that some rules that were previously intended for activation will not be activated. Specifically, these will be rules that, in a given state, matched the object of the Reservation class. This will prevent unnecessary activation that would occur if the user did not have a blocked account. The business rule implementing the second of these requirements shall take the following form: rule # Blocked user cannot borrow more than »3 books # protrusion 1000 when l: Rent (id == null, user.userStatus.name == # BLOCKED #) borrows: java.util.HashSet () from collect (Rent (removed == false) from l.user.lendings) eval (lends.size ()> 3) then l.setError (true); l.setErrorMsg (# You cannot borrow more than 3 books #); insertion (l); the end

An analysis of the complicated state of the above rules confirms the previous remark that creating a rule in the technical DRL format is a task that is too demanding for users who do not have programming skills.

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6.4 Advantages of Using the Rules Motor in the Created System There are some advantages to using a business rule engine in a BiblioRule project. The most important of these, from the programmer’s point of view, is the ability to define requirements in the form of business rules and their dynamic integration into the system. This means that it is not necessary to modify the source code of the application itself, in addition, there is no need to pause the application, because the changes are taken into account dynamically. In the BiblioRule system, an example of the discussed advantage can be the determination of the loan length in a table. In this case, if the rental regulations change in terms of the rental period, it is sufficient to modify the table and create a new view of the rules package so that the application takes the new changes into account. Another example of the dynamic implementation required in BiblioRule is to specify the action to be taken in the event of a breach of any of the rules. If the credit bureau’s rules say that canceling a deposited order will result in a fine, you can easily create a business rule that meets this requirement. If, after a certain time, it turns out that the cancellation of the order should not result in a sanction, but, for example, a blocking of the possibility of giving instructions to users, it is also possible to implement such a problem without any problems. Requirement in the form of commercial rules. Another advantage of using the business rules tool in the proposed term is that it can be done in almost natural language. For this reason, the Drools platform offers the possibility that the rules are in a pair of DSLR/DSL formats. Of course, there are some limitations to the creation of this rule mentioned above, although the developers who created the system have correctly configured the mapping of Java code to natural language expressions, solutions this conclusion should be successful. The undoubted advantage of using a business rules engine and a business rules management system is easier access to the specifications of the proposed system. An overview of defined business rules is definitely a faster way to analyze the logic of the IT system or find time-consuming methods in the source code of the application. This advantage has one more thing—it is the separation of program logic and data layer. Mention of the benefits that apply to the use of the business rules mechanism when designing an IT system cannot be mentioned, nor is the possibility of giving some control over the system to the user. This means that if it is necessary to implement a new request in the system, no intervention of the programmer is required—the user will be able, if possible, to execute the requested request himself, of course, in the form of business rules.

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6.5 Problems Encountered in Designing System and Application Errors The previous section lists the benefits that can be paid out when using a business policy management tool and a business policy management system in an IT system. However, it should be borne in mind that in order to obtain these benefits, several critical conditions often need to be met. An example of such a phenomenon is the previously discussed definition of business rules in a readable format using natural language. It should be understood that in order to use this feature, you must first map the Java code to the natural language. Of course, there may be a situation where the user will not be able to de-define the rule in a readable format, because the corresponding mappings may not exist. In this situation, you will undoubtedly need the help of a programmer, as a non-technical user can have great difficulty creating business rules in the technical DRL format. There were several issues with creating BiblioRule that should always be considered when using the Business Rules tool. The first, strictly programming problem, can be difficult to find errors in the system. In the event of a program failure, there can be many suspicions that it is caused by incorrect definition of business rules. There can be many reasons, starting with a letter in a text string, which is one of the conditions of a rule, and ending with more serious problems—for example, the mutual exclusion of a rule. To prevent or reduce such situations, the application code should be tested very well in terms of business rules. For testing purposes, you can use the test scenario feature provided by Guvnor. However, this method only gives poetic success. You can use it to check which rule will be activated based on the available facts. On the other hand, other key aspects are not checked, such as the correct implementation of the part of the rule that results from it. To perform these tests, you need to test the code of the application itself. The JUnit library was used for this purpose when creating the BiblioRule system. This eliminated errors, for example in the automatic loan length determination function. A good problem that users may have is a good knowledge of the Guvnor business rules management system. There is no doubt that for non-technical users, it will be necessary to help the programmer in the initial phase of working with this tool, otherwise they may be quickly discouraged for the application of rules business concepts. The introduction to software design of any technology previously unknown to programmers forces them to learn well and use it. When using the business rules tool, some experience with working with business rules also seems to be very useful. This experience avoids a situation where almost all attempts are made to implement most of them with the help of business rules. If a simpler solution can be applied in place, it should be used instead of serious code editing to implement the business rule. When working with the Expert business engine from the Drools package, you can see that it is an already advanced technology and it is easy to integrate it with

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other tools, such as the Spring Framework. However, errors may have occurred at this stage in the development of the Drools platform. During the implementation of the BiblioRule system, the absence of the possibility of using decision tables in conjunction with the agent responsible for the dynamic loading of modified rules proved to be an unexpected error. However, this problem does not exist when Guvnor is used with a rules engine. There may be some issues with Drools’ business policy technology when integrating Guvnor with the proposed application. In order to create and store a package of business rules, it is necessary to define the data model (facts) with which the business rules will be compared. If the model classes contain only simple attributes of type (String), total (int) or floating point (float), then there should be no problem creating the rules package. However, the problem occurs when model classes reference the content of external libraries, for example, when implementing an interface from such a library. Then there is often a long chain of dependence between classes, most of which are not relevant in defining a factual model. In this case, it is often not possible to create a rules package in Guvnor. Then you need to use certain maneuvers aimed at creating a data model that will not contain unnecessary dependencies, but will allow you to build the right rules package ready to use designed applications. Security issues should be taken into account when deciding to grant some control over the system to users who will be able to create their own business rules. A user with some programming knowledge can sometimes deviate from a business rule, the enforcement of which can cause significant damage to the system, for example, if you rent his name is John, then remove all fines of this borrower, it will certainly not comply with the lease. One should remember such extreme situations and protect oneself from their occurrence.

6.6 Analysis of the Use of the Commercial Rules Engine The advantages and disadvantages of using the business rules engine above can undoubtedly provide an answer to the question “is it worth using business rules technology when designing an IT system?”. However, the software development process is too expensive to answer with a simple “yes” or “no” answer. Work on the design and implementation of the BiblioRule system suggests that in this case, the business rules engine is doing its job. With its help, the criteria for dynamic implementation of requirements into the system (in the form of business rules) were met. In addition, the introduction of the rules register has ensured the centralization of knowledge, thus facilitating access for a wider group of users. The use of business policy technology in BiblioRule means that it can be used by many different lenders or libraries. Although each of these institutions has different rules regarding lending policy or sanctions, due to the flexibility offered by the business rules mechanism, BiblioRule could be adapted to the short-term rules of the rental company.

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However, when taking advantage of the rules offered by the trade rules mechanisms, be sure not to use them if this solution is too difficult to solve the problem. A good example of this phenomenon can be the use of decision tables in forms of tables. If a simple (required by a table) value of certain parameters is required when creating an application, it is worth using a simpler solution, such as a library that allows reading data from XLS files. Using the trade rules mechanism for this purpose can certainly prove too laborious, inefficient and completely unnecessary. We should also be aware of the fact that corporate policy mechanisms, despite their many benefits, are not a tool to solve all the problems that have arisen when designing an IT system. Some difficulties require the use of other concepts or tools. It is often necessary to rework the data model used in the application. It may also be the case that, although the use of business rules in a given part of the system is most expected, the mechanisms implemented in it prevent the use of the motor engine and it is necessary to do a fashionable procedure—programming science. When planning to use the rules motor in your application, you should analyze the balance of profits and costs that result from using the rules motor. The result of such calculations should be a relatively good indicator of the need for a trade rules mechanism.

7 Summary Modern companies are required to conduct their operations quickly and flexibly [54]. Similar requirements apply to software used by these organizations. The carefully implemented business logic of the application may prove to be completely outdated after some time. Then fast and accurate changes are needed to take account of the new requirements. However, if the implementation of the logic is contained in the hinges of the source code, any changes can become slow, laborious, and error-prone. The enterprise engine technology presented in the above work is an answer to the problems of rapid and flexible change of business requirements in information systems. The description and analysis of the use of business rule engines can be a useful source of information in the context of IT systems design. Based on the performed literature studies and analysis of the IT system project implemented as part of the practical part of the work, it is possible to draw several important conclusions, which are listed below: • The use of business rule mechanisms is a good solution in the context of the problem of frequent and rapid changes in business logic in information systems. The basis of such an opinion is, among other things, the fact that a simple expression—business rules—has a user who often does not have IT skills, the possibility of easy fashion system behavior.

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• The use of the trade rules mechanism should be preceded by a thorough analysis of the need to use it. In the case of the implementation of uncomplicated software or software for which there is a certainty that the requirements set for this software will not change during use, it is absolutely necessary to leave the business rules module. The time devoted to the implementation of this technology and the acquisition of expertise in determining rules will certainly prove to be incompatible with the effect achieved. • An introduction to a business rules management IT project, exemplified by Drools Guvnor, makes it easier to work with business rules. The storage of all business rules ensures the centralization of knowledge and allows stakeholders an easy way to find the information that interests them. In addition, the ability to test the business rules created in these tools allows you to fix common mistakes. • Despite the postulates of concepts and information on commercial regulations submitted by rules engine manufacturers, it is not possible to give all control over system requirements to a non-technical user. A programmer or other person who has the knowledge and skills in In software development, you will definitely need to define a decision table structure in a table or create files that map a natural language to a programming language. • Integrating the business rules tool on the example of the Drools platform with other technologies used in information systems is not a difficult task. Currently existing solutions in the world of business rules are such developed tools and cooperation with other popular technologies is not a problem. Business rule engines are not a specialized technology and are used by many users. Any potential error that may occur in these tools is detected and corrected relatively quickly. BiblioRule software created as part of the work, which aims to support the work of lending and libraries, is an example of the application of business rules concepts in the IT system. At present, however, this system is not yet suitable for commercial use. Key aspects that need to be improved in terms of system usage are application security issues. It would therefore be necessary to introduce tasks for rental staff in order to apply the appropriate levels of authorization when drawing up and amending business rules. In addition, mechanisms should be used to protect the system and data against “save” rules. Achieved goals of the above work. Analysis of the use of business rules engines and assessment of the possibilities of integration with other information technologies have been achieved. Given the lack of Polish literature on business policy technology and the fact that the work can be a useful source of information in connection with the decision to use the business policy engine in IT, another goal is to contribute to the popularization of the topic in Polish literature can also be considered completed.

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Data-as-a-Service versus Information-as-a-Service: Critical Differences in Theory, Implementation, and Applicability of Two Growing Cloud Services Ilias Wagner and Zuzana Tacacs Abstract By exponential increase of data produced and processed in all industries, data-oriented services are having increasing importance and popularity. Companies are seeking for services related to administration of data, data analysis, preparation of insights, especially when is coming to Big Data. Additionally, to enrich their own data sets are available external data providers. In this chapter, we focus on detailed understanding of both Data-as-a-Service and Information as a service on cloud. As the importance of cloud computing and Big Data continues to rise, service providers, business leaders, consumers, and researchers alike need a clear understanding of these two concepts to be able to distinguish between them. This paper seeks to find a clear definition and specification for DaaS, IaaS, as well as contrast the two concepts, highlighting which service is better in which situation for what kind of company.

1 Introduction 1.1 Relevance In 1997, when Steve Jobs shared his vision of being able to access his data anytime from anywhere in the world, the future of the internet was hard to foresee. A little more than a decade later, cloud computing came about and changed how business was conducted. It allowed companies and individuals to move their data onto centrally stored servers and access data from anywhere using cloud services. The rise of cloud computing brought with it entirely new business models, commonly referred to as Everything-as-a-Service (or Anything-as-a-Service), abbreviated as XaaS [1, 2].

I. Wagner (B) Wirtschaftsuniversität Wien (WU), Vienna, Austria e-mail: [email protected] Z. Tacacs Faculty of Management, Comenius University, Bratislava, Bratislava, Slovakia © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_3

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Now, in 2017, the cloud industry is still growing at an unprecedented 18% rate (according to the [3] that further predicts a total growth of the cloud market of 55.30% between 2017 and 2020) and more and more service options have found their way into the common business realm. While the classic distinction into Software-asa-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service has been around for long [4, 5], there are two more recent additions to the list of cloud services: Data-as-a-Service (DaaS) and Information-as-a-Service (IaaS). DaaS, which is often connected to the trend towards Big Data, allows companies (and in many cases individuals) to use web-based applications to access data stored in the cloud—regardless of where the data consumer is at the time. This can apply to both company-internal data that has been moved to cloud servers, or access to public data such as address data, health data, and consumer data offered by specialized data service companies. IaaS goes a step further. With the use of IaaS options, companies can tap into the data that is stored on cloud servers, and have this data be enriched, contextualized, or transformed into useful information that allows business insights [6]. While both of these services have become more popular in recent years, as evidenced by the growing number of DaaS and IaaS-providers and white Paper publications by companies like Informatica, Intel, Oracle, Microsoft, and others, the terms DaaS and IaaS are often used interchangeably or with different meanings, resulting in potential confusion for consumers, decision-makers and researchers alike.

1.2 Goals and Objectives As the importance of cloud computing and Big Data continues to rise [3, 7], service providers, business leaders, consumers, and researchers alike need a clear understanding of these two concepts to be able to distinguish between them. This paper seeks to find a clear definition and specification for DaaS, IaaS, as well as contrast the two concepts, highlighting which service is better in which situation for what kind of company. To do so, in Sect. 2 the theoretic framework will be presented. It first offers a general introduction into cloud computing, discussing the history of how cloud computing came about and how it evolved over the last 10–15 years. After defining the core concepts, the essential characteristics and different deployment modes of the cloud is discussed. Moreover, a general characterization of cloud services is provided. In following Sect. 3, we describe the difference between Data and Information. Consecutively, the two core concepts of this work, DaaS (Sect. 4) and IaaS (Sect. 5) is introduced and characterized in detail. At first, DaaS is defined, distinguished from similar but different concepts, specifications given, the suitability explained as well as real-world examples mentioned. Moreover, the strengths and downsides of this type of cloud service will then be described. The same is done for IaaS. This is done by utilizing the little scientific research available on the topic, as well as current

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white papers by reputed thought leaders and industry-leading companies in cloud computing. In Sect. 6, the two concepts are put together to be contrasted in terms of theory, suitability, and general use in real-world applications. The final analysis is presented in a matrix that clearly outlines the similarities and differences between the two concepts. Finally, guidelines are given as to what company in what context should use what kind of those two services. In Sect. 7, conclusions are drawn from the analysis and recommendations given for business leaders, consumers, and researchers. Moreover, the limitations of the study as well as topics for future research are discussed in the last part of this section.

2 Theoretical and Conceptual Background 2.1 Cloud Computing in General Before various cloud services can be explored in more detail, it is important to have a general understanding of what cloud computing is and how it works. Looking at the scientific literature, it becomes clear that there has been a large confusion around what cloud or cloud computing is. Numerous articles try to develop an integrated, commonly agreed upon definition of the cloud, such as [4] or [8]. One of the most commonly used citations [2] comes from the National Institute of Standards and Technology (NIST) which defines cloud computing as “… a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction” [5]. Another alternative definition comes from Gartner in its 2008 report on cloud computing [9]: “a style of computing where massively scalable IT-enabled capabilities are delivered ‘as a service’ to external customers using Internet technologies.” While cloud computing is the technology enabling access to servers hosted by external service providers (as opposed to the company using own servers) using the internet, a company doing so makes use of “cloud services”, or it uses them “as-a-service”. It was in 2008 that Gartner published its special report on cloud computing calling it “an emerging phenomenon” and characterized it as “a way of delivering IT-enabled services in the form of software, infrastructure and more” [9]. It further lists “the use of virtualization technologies […] open source, service-oriented architectures, and widely available computing standards, combined with the pervasiveness of the global Internet” [9]. As reasons for the growing importance of cloud computing. As per (Hashemi) [10], Cloud computing emerges as one of the hottest topics in the field of information technology. Cloud computing is based on several other computing research areas such as HPC, virtualization, utility computing, and grid

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computing. In 2009 white paper, IBM cites the “dramatic reduction of IT costs that is achieved with dynamic infrastructure” as the key driver for the cloud [11]. An important distinction needs to be made between grid computing and cloud computing. As IBM explains [12] in a blog post on the very topic, grid computing was about the linkage of “disparate computers to form one large infrastructure, harnessing unused resources.” They explain further, that grid computing enables users to “provision resources as a utility that can be turned on or off.” According to IBM, the difference is that cloud computing takes this to a new level, by delivering provision “on-demand”, which would prevent over-provisioning [12]. For the sake of this paper, the definition of cloud computing as per [5] will be followed. Characteristics of Cloud Computing As the frequently cited paper by NIST [5] points out, there are five essential characteristics of cloud computing: • On-demand self-service: a consumer can by himself initiate the use of elements “such as server time and network storage, as needed automatically without requiring human interaction with each service provider. • Broad network access: because cloud services are provided via the internet and special online interfaces, customers can use these as self-services wherever and whenever they want, from any supported device like mobile phones, tablets, or laptops. It is therefore possible to utilize these services not just when at the office/inside the company, but only an internet connection and a supported device are required. • Resource pooling: before the advent of the cloud, most companies used to store their data in separate repository silos. This led to the frequent problem that within big organizations one department couldn’t access or wasn’t aware of the data/information that other departments had gathered and available [13]. In cloud computing, data is pooled together while the customer typically doesn’t know exactly where the physical location of the storage is [5]. This pooling allows for the serving of multiple clients at the same time. That is also reason why the cloud is especially interesting for start-ups and SMEs that often don’t have the financial resources necessary to set up such infrastructure themselves and can flexibly scale these cloud resources [2]. • Rapid elasticity: Companies that need to scale their cloud computing resources can do so quickly and effortlessly. In case customer demand goes down, they can also release these resources rapidly. As [2] point out, this elasticity allows companies “to react more flexible to changes in customer demands” (p. 214). The National Institute of Standards and Technology (NIST) even goes as far as to say that in the perception of the consumer these capabilities “often appear to be unlimited and can be appropriated in any quantity at any time” [5]. • Measured service: Sometimes also referred to as “metered service”, the measurability describes a “metering capability” [5], depending on the type of service, for example, storage, bandwidth, etc. As a result, cloud services typically use a pay-per-use-pricing model which means that consumers only pay for when they

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actively use the service. In [2] is called this benefit “variable, usage-based billing” (p. 218) and this again is especially attractive to start-ups and SMEs as “potential savings” can be realized, both “upfront and ongoing”, [5] point out that as such resource use may be “reported, monitored and controlled”, this characteristic of cloud computing provides transparency for both parties, the service provider and the consumer. Deployment Modes of Cloud Computing. Cloud computing can be provisioned in several different ways, depending on where the servers are hosted and who has access to or may use them. Altogether, according to the NIST, there are four different deployment modes [5]: private cloud, community cloud, public cloud, hybrid cloud. The Indian smart services company Sysfore summarized them in an illustration in one of their blog posts as follows [14] (Fig. 1):

Fig. 1 Types of cloud computing (based on [14])

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Private cloud: if access to a cloud infrastructure is exclusive to one single company where multiple users access them, e.g. different departments, a private cloud exists. The location of the server, as well as its hosting and management, do not have to be with the company (on-premises) but may be with a third party [5]. Community cloud: This is in place if access to the cloud infrastructure is shared by, but is exclusive to “a specific community of consumers from organizations that have shared concerns” [5]. It is possible that one of the organizations or a third-party owns, manages and operates the infrastructure, while the server may be on or off-premises. Public cloud: Some cloud infrastructures are made available to and accessible by the general public by organizations, academic or public institutions. Famous examples are cloud-storage services like Dropbox or Google Drive where any user can upload and store files. The servers exist “on the premises of the cloud provider” [5]. Hybrid cloud: This is not a separate form per se, but a term given to solutions that combine two or more of the other deployment modes. A hybrid cloud is created when two cloud infrastructures that “remain unique entities” are “bound together by standardized or proprietary technology that enables data and application portability” [5]. Service-Oriented Architecture and Web Services as enablers of cloud computing and cloud services. Two important technologies lay the framework for the existence of cloud computing: service-oriented architecture (SOA) and web services. The most frequently cited definition of service-oriented architecture (SOA) comes from the OASIS [15] which defines it as a “paradigm for organizing and utilizing distributed capabilities that may be under the control of different ownership domains.” While the focus had for the longest time been on components and their respective needs, this service-oriented paradigm enables that smaller, lower-level individual services can be grouped for a higher-level service. This delivers the benefit of reduced complexity for the service, as with SOAs “capabilities can be used without needing to know all the details” [15]. The advantages of service-oriented architecture most commonly listed are: • Reduced complexity: As [16] highlights, the loose coupling that characterizes SOA makes it easier to adjust services when required. Moreover, application developers no longer need to have an data management expert [16]. • Enhanced interoperability: due to its focus on enabling communication between various services instead of focusing on specific components of a service, SOA allows for enhanced interoperability between services [17]. This means that workflows can be expanded to integrate external business partners [18]. • Rapid scaling: because SOA allows for many smaller level services to be combined (orchestrated) for the delivery of a higher-level service to the end-user, a company can scale faster if the business needs dictate it [15].

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• More agility: OASIS underlines that due to the ability to grow and scale as required, the infrastructure supported by SOA “is also more agile and responsive than one built on an exponential number of pair-wise interfaces” [15]. As the mentioned definition implies, SOA offers the required architecture for a complex and integrative environment of cloud services like DaaS and IaaS where resources of various owners [15], including data owner and data provider, are used to deliver end services to clients via a service interface. The end customer is less concerned with whose resources are being used but is interested in having access on-demand. Web Services are the preferred mechanism for the implementation of SOA. As an emerging modeling paradigm for distributed systems SOA is often confused with a wide range of networked information technologies. The Web Services Working group of the World Wide Web Consortium (W3C) defines Web Service [19] as “a software system designed to support interoperable machine-to-machine interaction over a network. It has an interface described in a machine-processable format (specifically WSDL). Other systems interact with the Web Service in a manner prescribed by its description using SOAP [20] messages, typically conveyed using HTTP with an XML serialization in conjunction with other Web-related standards.” As [21] concludes: “The comparison to SOA is, in this case, immediate and natural as SOA was born through the convergence of several web technologies.” The described SOA lays the foundation for the communication of web services. This functioning of web services is illustrated in Fig. 2. As IBM describes on its websites, there are 3 main components to a web service: service provider, service requestor, and service registry. The service provider publishes a service description (using WSDL language) which is stored through a

Fig. 2 How web services work (based on [22])

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publish action to the service registry. The service requestor finds the description there and therefore understands what services are available and binds the service [22]. The publish and find actions are done via SOAP (Simple Object Access Protocol), the bind and the communication between service requestor and service provider is typically done via Extensible Markup Language (XML). In this way, web services connect applications and allow for interoperability. They also allow for the realization of cloud services. Cloud Services—Everything-as-a-Service (XaaS): As more and more companies started to adopt cloud computing and moved their data from local servers onto cloudbased servers, entirely new services were developed by cloud-service providers to deal with the needs and demand of their consumers. Because the range of these services was soon so broad “that everything will be delivered as a service mostly over the Internet” [1], the term of “Everything-as-a-Service” (or XaaS) was soon born and coined by companies like Hewlett Packard. In its most basic form, cloud services are a wide range of resources that a service provider delivers to customers via the internet [23]. According to a commonly used distinction, mentioned e.g. by [4, 5], three types of cloud computing differ in the actors addressed and the services (cloud services) offered: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) (Fig. 3). Software-as-a-Service: SaaS describes software that is not hosted on-premises, but on a web server, that can be accessed independently of location and device using an Internet Browser. The customer only uses the software, but all aspects from networks, storage, server, up to the application itself are managed by the vendor. The most common types of SaaS are Customer Relationship Management (CRM) and Enterprise Resource Management (ERP) software. Moreover, collaboration tools like

Fig. 3 Cloud service models (according to [5])

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Google Docs or project management software like Asana or Basecamp are all SaaS services that can be integrated to allow for seamless cloud collaboration between teams and companies. Platform-as-a-Service: a less-integrative approach is PaaS where the customer is in charge of managing the application and data whereas the vendor takes care of everything else. As the name suggests, PaaS provides a platform in the cloud in which the customer can upload and run their own applications—whether for exclusive or public use. The most important PaaS providers include Salesforce, Microsoft Azure, Amazon Web Services. Infrastructure-as-a-Service: as the least integrative approach, IaaS leaves the customer in charge of application, data, runtime, middleware, and operation system, while the vendor itself offers networking, storage, servers, and virtualization services. The benefits of freedom of configuration and customization come with the downside of more responsibility and required knowledge to manage the infrastructure. IaaS is most common in big research and public companies that require heavy customization and individual cloud usage. How responsibilities are shared between vendor and customer is summarized in the following illustration (Fig. 4) by Australian cloud provider Crucial [24]. While this three-tiered-distinction has long prevailed, it is not sufficient to capture the entire breadth of cloud services (everything-as-a-service) that have been suggested over the last years. Gartner also summarizes in its 2008 report on cloud computing the future potential as cloud services by stating that “Ultimately, everything potentially becomes a service” [9]. Distinction. Cloud services must differ from a few other terms that are erroneously used as synonyms by some companies and managers. It is important to distinguish cloud services from web services. As TechTarget writes [25], web services “are the tools that allow users to interact with software over the Internet.” The W3C (World Wide Web Consortium) defines them as “a software system designed to

Fig. 4 Responsibilities of vendor and client in on-premise hosting versus the three forms of cloud services from a client’s perspective (according to [24])

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support interoperable machine-to-machine interaction over a network” [26]. They allow the integration of web-based applications by the utilization of standards like XML, SOAP, WSDL [27]. Cloud-services on the other hand “are the servers that store the data, security and other infrastructure” that web services require to deliver value to their users [25]. As described in Sect. 2.1, web services are typically realized through a serviceoriented architecture (SOA) and allow for communication between service requestor and service provider as well as the service registry. The connection of SOA to business value is described in [28]. Web services are different from cloud services in that while they may be based on cloud computing, they need not be, as they may simply connect two applications [25]. However, they are also interrelated, especially as they enable one another as the following example shows. When a user opens Google Docs to create a document, the software Google Docs is offered to him as a Software-as-aService via the cloud. He can access the software through his web browser, without having to install the software on his local computer; the software is stored on the cloud servers and provided as a service to him. When the user starts typing and enters content to be put into the document file, the communication is sent from the user as the service consumer to Google as the service provider via a web-service. In other words, the web service sends the user’s input to Google Docs. So, while the cloud service provides and enables the software, the web service allows the use of the cloud service. To summarize, cloud services can be characterized as “any service that is delivered via the internet to a customer on a local device.” The extent of the resources provided and the sharing of responsibility between provider and vendor may differ.

3 Data Versus Information Before DaaS and IaaS can be characterized, a distinction shall be made between the terms “data” and “information”. The most frequently cited model that—amongst others—also distinguishes between data and information is the so-called DIKW pyramid [29], originally developed by [30]. It puts data at the bottom, information at the next higher hierarchical level, to be followed by knowledge and wisdom (Fig. 5). The Open Data Center Alliance (ODCA) offers a definition of data and information that positions information as being derived from data. More specifically, they define data as “The lowest level of abstraction from which information is derived; for example, an address” while information is defined as “A combination of contextualized data that can provide meaningful business value or usage; for example, the postal address of a business client” [31]. Furthermore, the ODCA offers a model that explains how data is turned into information as a prerequisite for effective business insights (see Fig. 6).

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Fig. 5 The DIKW Pyramid (according to [29])

Fig. 6 Transforming data into information and insights (based on [31])

The processes therefore by which data is turned into information are collation, standardization, integration, contextualization, value-add/new data derivation, aggregation. This however only produces information in itself; it is not yet guaranteed, that it is in a usable and optimized format for the company, or what [6] call “enterprisefriendly or user-friendly format”. As previously mentioned, analytics has the task to put information together in such a way, that it allows a company to derive clear insights. The tasks mentioned by the ODCA are examined below: • Collation: The collation of data means to sort data according to predefined criteria—referred to as identifiers, such as alphabetical or numerical order. Collation of data in databases can be done automatically once an algorithm has been defined. The algorithm then goes about comparing two sets of data at a time and sorts it, eventually producing a total order amongst all datasets resulting in collated data (ordered items). • Standardization: As Oracle [32] describes “the purpose of data standardization is to make your data consistent and clear. Consistent is ensuring that the output

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is reliable so that related data can be identified using common terminology and format. Clear is to ensure that the data can be easily understood by those who are not involved with the data maintenance process.” Integration: When data is integrated, it means that data from varying input sources are combined in such a way, that they appear for end-users in a unified view. The importance of data integration has grown as big data has come around and data from more and more different sources need to be integrated, such as when two companies merge their databases or scientific research has to access data from multiple databases for the same one project. Contextualization: this describes the process of putting input data into a broader context within which it was generated. The ODCA gives the example of data as “the number of customers unsubscribed from a service” [31], while looking at how long these people were subscribed, why they unsubscribed, and other factors would allow this data to be contextualized. Value-add/new data derivation: this is when input data is used to derive further data through a formula/derivation algorithm. New data is created that may be used by the company to derive valuable information and insights. Both the quality of the input data must be high and consistent, and the derivation method is correct as otherwise, the derived data is corrupt. Aggregation: gather and express data in the form of a summary on the maximum required level of detail.

The [31] also states that if information-as-a-service is to be effective, it must “have the ability to provide standardized and secure methods to create, manage, exchange, and extract meaningful information from all available data in the right format at the right time”.

4 Data-as-a-Service (DaaS) As one of the most frequently cited as-a-service modes, DaaS has received a lot of attention in recent years. This section will examine this concept in detail, distinguish it from other services, highlight its benefits and downsides, as well as characteristics and pricing models of DaaS. To conclude, real-world examples and applications as well as drivers of DaaS will be described. DaaS might be classified as a service while having four characteristics: intangibility, heterogeneity, inseparability, and perishability [33]. Before we take a closer look at DaaS, the concept of data first needs to be laid out in more detail. According to the ODCA, the term data generally describes “The lowest level of abstraction from which information is derived; for example, an address” [31]. A commonly used model in cloud computing separates data into three separate types of data: structured, unstructured, and semi-structured data [34].

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• Structured data: As implied by the name structured, when data can be brought into order and classified according to certain criteria, data is structured. Such data can easily be stored in databases where it typically resides in rows and columns and can easily be processed automatically and be used for analysis and derivation of information and insights. • Unstructured data: this kind of data cannot typically be stored in databases and therefore not be automatically analyzed by algorithms. This data is in a way useless until it has been analyzed manually and information and insights derived. This type of data is said to be in raw formats, such as audio or video data. No identifiable structure within this kind of data is available” [35]. • Semi-structured data: as a hybrid form between the other two, the semi refers to the fact that there is some structure, but the data is not in a table like structured data. One definition by [36] states it as “data that is (from a particular viewpoint) neither raw data nor strictly typed, i.e., not table-oriented as in a relational model or sorted-graph as in object databases.” The research firm IDC estimates that around 90% of all enterprise data is unstructured [37]. And the increasing use of big data especially leads to more unstructured data being created which is why companies need to focus more on its analysis [38].

4.1 Definition of DaaS As Delen and Demirkan point out “with data-as-a-service, any business process can access data wherever it resides”. In other words, using cloud technology as described earlier, businesses can utilize an online interface (connected via the API— Application Programming Interface) to access data stored on a server in the cloud [39]. A concise definition comes from David Linthicum from InfoWorld who simply calls DaaS “cloud-based databases” [40]. The innovation with DaaS is that companies are no longer storing their data on their own on-premises servers, but upload them to cloud servers. Two examples of data providers are Google Adwords or Google Trends where using an online interface, any person from any device worldwide can enter search queries and find out how many times certain keywords were searched in a certain time frame in a certain region. Based on this information, any SME or larger company can decide how to advertise via the Google Search Platform. Ovum defines DaaS as “the sourcing, management, and provision of data delivered in an immediately consumable format to organization’s business users as a service” [41]. As mentioned in [42] about architecture aspects, DaaS systems should own extremely dynamic characteristics to respond to requirements from different communities of users.

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And as [43] highlights in a blog post on the IBM Big Data Hub, offering a taxonomy between storage-as-a-service, data-as-a-service, analytics-platform-as-aservice, and analytics-as-a-service, DaaS also includes data feed and aggregation.

4.2 Distinction Given the wide number of as-a-service-options, it is necessary to provide a clearer understanding of how DaaS is different from other cloud services. From storage-as-a-service. As Fattah points out in his blog post, while storageas-a-service typically only offers a company the storing of its data, a DaaS solution allows “more sophisticated access to the data”, including relational database management systems, as well as data aggregation and data feeds [43]. From software-as-a-service. While DaaS has been called “a cousin of software as a service” [44], it differs from SaaS in that DaaS utilizes SaaS in order to be delivered. When companies utilize DaaS services to access data from anywhere, they do this via an online interface of a SaaS tool. Hence SaaS is a required “deployment model” [5] that serves to deliver DaaS. From platform-as-a-service. As another cloud deployment model, PaaS describes an online environment where a company can host and run its own applications on the platform offered by a cloud provider [5]. In other words, applications are built and deployed in the cloud, whereas with DaaS, a company may initially load its data to the cloud from which it is then accessed through a special online interface. Hence, for the sake of this paper, DaaS is defined as “a cloud service model in which a company can access relevant data, which is stored on cloud servers by a specialized DaaS provider, through the use of a specialized interface. The DaaS service provider may also aggregate the data from various sources and offer it in the form of customized data feeds. The data can be in any one or a combination of structured, unstructured or semi-structured form.”

4.3 Characteristics of DaaS The following DaaS characteristics we have identified: • Multiple sources: DaaS services are frequently used to bring different data sources together. It is important to understand that the DaaS provider and the data source are two different roles, that often do not coincide. Oftentimes DaaS providers are specialized companies that focus on aggregating various data sources into relevant streams for customers [13]. Moreover, companies use DaaS frequently to organize their data and enrich it with third-party data [31].

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• Different types of data: DaaS utilizes all three different types of data: structured data, unstructured data, and semi-structured data. • Relevant actors: the DaaS framework typically encapsulates the following actors: data consumer, DaaS provider, and data source(s). • Up-to-date data: DaaS allows companies to access real-time data streams that are aggregated by specialized DaaS providers. This is because the data is put together at the moment the company decides to look up the data. • On-demand access: as with all cloud services, companies make use of the service at the moment they want to access certain data utilizing an online interface, typically through a web browser or a customized software client. • Storage is provided: the data that the company accesses is stored in the cloud, whether it is company-proprietary data that has been transferred to cloud services or third-party and public data that is used to enrich the data sets.

4.4 Suitability of DaaS There are various situations in which companies can benefit from the use of DaaS: For SMEs that don’t have a particularly large set of customer data. DaaS is an attractive option for any company that wants to access relevant data provided by third parties to either enrich, complement, or largely make up for a potential lack of company-internal data. This may especially be relevant for startups or SMEs that do not (yet) have large data sets on their customers. Companies that want to enrich their data with relevant public data. Companies of all sizes can use DaaS to enrich their own data sets with relevant data from third parties. A commonly cited example for the United States is Dun & Bradstreet which offers detailed company records that can enrich customer data sets [38]. Companies with in-house data analytics experts. As the ODCA points out, data itself still needs to be interpreted and analyzed for companies to derive actionable insights [31]. If a company has the required data analysis experts in-house, then it can profit from focusing on the analytics while using a DaaS provider to gain real-time access to the data. Companies without data management expertise. As Pringle et al. state DaaS for many companies data management is rarely “a high priority” and for most of them it would not be a good resource investment to develop these skills “especially where businesses are looking to adopt and experiment with new technologies accelerated timescales” [41]. Companies that need big data, but do not have resources or demand to hire data scientists full time. BrightPlanet points out on its website that especially smaller companies and companies not willing to hire data experts for in-house engagements needing data experts brought about the DaaS market [45]. DaaS has the potential to provide cheaper, faster, and easier access to data. DaaS is an emerging cloud computing service model to making useful data available to users as a service through a network in a timely and cost efficient manner [46].

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4.5 Benefits of DaaS DaaS (DaaS) on cloud solutions have multiple benefits: agility, cost-effectiveness, data quality, cloud-like efficiency, high availability, elastic capacity. As they are largely in line with the general characteristics of the cloud described under Sect. 2.1, only agility, cost-effectiveness, and data quality will be further described here. • Agility: As Newman points out when DaaS is provided by specialized DaaS companies that exclusively focus on compiling data into relevant streams so that customers can “access the streams they need, when they need them”, companies no longer have to be so focused on data themselves and benefit from “greater agility, because they can seamlessly and effortlessly get the exact data they need” [13]. • Cost-effectiveness: DaaS allows companies to benefit from actionable insights from big data, without having a lot of the administrative burden, such as maintaining databases, parsing data or requiring internal company specialists for data management that company-internal databases require by “offloading” it “to vendors for whom it is a core competence” [41]. • Data quality: compared to other configurations, DaaS leads to a single point for updates, which ensures that the quality of the data is high and prevents it from being corrupted or manipulated. However, as will be shown in the next point, others see data quality at risk in DaaS.

4.6 Downside/Challenges of DaaS As much potential as DaaS brings for companies, there are also significant downsides to its implementation that must be considered when opting for the usage of DaaS. These include: • Data security: Once data is moved from internal databases to databases in the cloud, security becomes an issue as a company needs to rely on security measures taken by the DaaS providers to secure access to the data. Companies need to carefully analyze how security features and tools by DaaS vendors “work with” a company’s internal system. As Mukherjee and Shaw point out, there are no effective solutions yet that help to restrict access to data to those few that are authorized to do so [47]. • Data quality: As Pringle et al. state, if companies rely on DaaS providers to access data and derive insights from it, “users should be able to implicitly trust that data” [41] However, especially given the many sources from which data can be compiled and the fact that most of them are unstructured (meaning it can’t easily be put into databases), data quality remains a large concern [41, 48]. They recommend that as it is not within the ability of most companies to develop the competence of how to process this data, it is DaaS providers who can position themselves for

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success by providing that expertise [41]. If data can’t be processed and structured well, it will be hard to separate which data is valuable and what is just “noise”. Governance: Data governance is defined as “a companywide framework for assigning decision-related rights and duties in order to be able to adequately handle data as a company asset” [49]. This is required, because different file formats, definitions, and standards across departments can lead to a lack of interoperability and high costs unless controlled by governance policies [38]. Sarkar further recommends to “regularly audit the implementation of data governance policies” and Nazemoff points out that such policies can help organizations to “to more easily integrate, synchronize and consolidate data from different departments and to exchange data in a common format allowing for faster decision to occur” [50]. Special attention needs to be paid to handling data by end-users and protect the data and insights from the misuse [51]. Privacy: Another major concern with DaaS is to ensure the privacy of data stored on cloud servers. As Pringle et al. points out, it was easier to manage customer data on-premise inside a company, than for example data derived from public social media posts or web cookies [41]. They suggest that DaaS vendors should free DaaS users of this concern by providing compliance with legal rules and develop experience in “identifying data provenance, user preference and anonymizing where appropriate”. The privacy issue is complicated further by differences in applicable national regulations; there is demand from DaaS vendors to handle this issue, highlighting it could be a valuable competitive advantage for them against other vendors [41]. Expertise: The company only has access to the data, but still needs to perform analysis on it. This can be a downside if the company has not yet developed the required experience in-house to perform data analytics. Integration into current enterprise architecture: Regardless of a selected type of DaaS, the solution needs to fit into current Enterprise architecture. According to [52], architecture can be described as the structure of components, their inter-relationships, and the principles and guidelines governing their design and evolution over time.

IBM found in a global study that surveyed more than 1000 companies that only about 20% of these companies use more complex forms of analytics while 70% of companies state that “they aren’t lacking data” [53]. Therefore, IBM concludes, “the key to driving business value is how enterprises use data and sophisticated analytics” [53]. Companies that use this complex data are labeled by IBM as “data-driven” and “Generation D”. The study found that companies using these complex analytics were outperforming other companies on significant benchmarks, such as penetrating new markets, developing new revenue streams, and efficiency in operations overall.

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4.7 Pricing Models As Sarkar reports, there are four general types of pricing models used in the DaaS industry: request-based model, volume-based model, data type based-model, and corporate subscription model [38]. • Request-based model: in this model, every time the customer makes a request for data, it is charged a fixed, predetermined amount. This type is especially useful for small-scale customers that only rarely require DaaS services. • Volume-based model: with this model, the pricing is based on the amount of transaction data (the volume) that the customer consumes. There are typically a few different categories and a limit at which pricing is capped; if the consumers go beyond this, they “get charged at the next tier level”. • Datatype-based model: as a more sophisticated strategy, this pricing model differs between the different data types a customer consumes. Sarkar points out that this complexity can be a downside, but may be an adequate strategy in certain sectors. • Corporate subscription model: as the most commonly used pricing model, a company buys a subscription either for the entire company or for a certain number of users. Once the subscription has been bought, the service can be used without limits during the subscription period. Which type of pricing model may be best for a company to choose depends on the type of industry as well on the preferences of the customer and should be considered in the light of how often and extensively DaaS is used [38].

4.8 Examples of Real-World Applications An example of Data as a Service is the same-called service “Informatica Data as a Service” which e.g. encompasses postal addresses, email addresses and phone numbers verification [54]. When a customer enters the address information into an Informatica customer’s registration form, the data is automatically checked against Informatica’s address database and verified. More public examples are e.g. the portal undata (http://data.un.org) by the United Nations as well as Google Public Data (http://www.google.com/publicdata). Both these portals make public data available to customers all around the world through an online interface with a search function. Undata also offers an API through which SaaS integrations can be made, allowing data to be illustrated on websites or software (Figs. 7 and 8).

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Fig. 7 UN data as an example of a DaaS application1

Fig. 8 Google public data2 as another example of a DaaS application

Another frequently cited example in the B2B field is Dun & Bradstreet’s solution Hoovers [38]. According to [55], “D&B Hoovers combines more than 120 million business records from 30,000 sources in 190 countries, updated 5 million times a day with an intuitive, dynamic user interface to help customers put the best data in the hands of sellers at the point of interaction. This unique combination of data, analytics 1 https://data.un.org/DocumentData.aspx?q=intentional+homicide&id=432. 2 https://www.google.com/publicdata/directory?hl=en_US&dl=en_US#!.

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Fig. 9 Dun & Bradstreet as leading DaaS provider of business data in the US

and technology increase sales productivity by enabling more strategic targeting and the ability to have more informed conversations, so organizations can accelerate sales and drive global business growth. One of the ways how businesses can use D&B Hoovers’ service is by entering information on desired leads and automatically receiving a list of potential leads that correspond to the desired characteristics [38] (Fig. 9).

4.9 Drivers According to [38], 5 drivers as reasons why more and more providers start offering DaaS options to their customers: • Engaging customers with data-driven choices. More and more companies like Amazon and Alibaba have found ways in which data can be utilized to help customers make better choices, such as recommended products based on similar customers’ past purchases on Amazon. Furthermore, social networks have become more important for customers as platforms of discussion and sharing. Sarkar points out that this has led to customers being more empowered in making decisions, and companies searching for ways to offer customers this data. • Monetization. Some companies have come up with ways to make money by renting the company’s internal data to partner or customer companies that can benefit from the harnessed data. Entirely new business models have evolved as companies are seeking to build new profitable income streams from big data available. • Public sector and government. Also, the public sector and government have started to become data providers [38]. This gives companies the additional benefit of utilizing public data to enrich their data sources. The most famous example is UN

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Data organized by the United Nations Statistics Division which gathers knowledge from data-publishing institutions and makes it accessible to consumers worldwide via a separate API. • Technology shift. The increasing number of customers using the internet to inform themselves and purchase products and services creates enormous amounts of data (big data) that can be utilized to better understand customer preferences and behavior. Companies, therefore, are confronted with learning how to leverage and organize that data for increased customer satisfaction and profitability of the company. • Pioneering organizations. Pioneering companies are already offering DaaS services to customers is another reason why more and more businesses have to check if and how becoming a DaaS provider themselves may be relevant for their success. Another important prerequisite that allowed for the development of DaaS is Service-oriented architecture (SOA) (for more details see Sect. 2.1). The reason SOA is an enabler of DaaS is that it “has rendered the actual platform on which the data resides irrelevant” [44].

4.9.1

Structure of Cloud-Based DaaS Providers

There are three important actors in a DaaS network. They are the original data providers, so data-publishing institutions, there is the DaaS provider utilizing cloud computing and cloud infrastructure, as well as data consumers utilizing a web interface to access data in real-time. This is shown in the following illustration [38] (Fig. 10).

Fig. 10 Overview of cloud-based DaaS provider (based on [38])

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5 Information-as-a-Service In this section, the recently evolved IaaS service will be characterized. Analogous to Sect. 3, after defining the term, benefits and challenges will be explained, suitability discussed as well as drivers and examples of providers/services given).

5.1 Definition One definition of the term comes from the ODCA that defines Information as a Service as “The ability to provide standardized and secure methods to create, manage, exchange, and extract meaningful information from all available data in the right format at the right time” [31]. A more extensive definition by [6] states that “Information-as-a-Service is a cloud service model that provides cloud customers with data in an enterprise-friendly or user-friendly format, which is a service representation using a standardized schema to generate and present information efficiently.”

5.2 Distinction From analytics-as-a-service. A term that is increasingly being used by companies like Oracle and SAS is analytics-as-a-service. To get a better understanding, it has to be examined what analytics actually means. The ODCA describes analysis as an essential step for actionable insights to be derived from data [31]. With analyticsas-a-service, the service becomes the data analysis itself. The company outsources the analysis of specific datasets to a specialized external vendor and is presented on-demand with the results of the data analysis. The process of how this data is analyzed and made sense of is still individual to the strategic goals and objectives of the company, as well as its industry and activities. The customer, therefore, needs to work together with the specialized vendor to create what [6] termed a “standardized scheme” (p. 28) as a basis for analysis and interpretation of the data. The results of the data analysis are information in a company-usable format that may be used to derive further insights [6]. Therefore, analytics as a service can be understood as a part of IaaS and presents the first step of turning data (e.g. from a DaaS provider) into actionable insights for the customer company. From insights-as-a-service. Providing actionable insights for business becoming more demanded in recent years. Perform analysis and describe the status of a company based on the data collected or by using ML is powerful. To implement changes and improve the situation in the company is often required to obtain as well actionable insights based on the findings. The ODCA also sees that information is being derived

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Fig. 11 Information-as-a-Service and its subforms (own interpretation)

from data as one step before actionable insights in its model, it takes analytics and predictions to turn information into “actionable insights” [31]. It is commonly agreed that insights are information in a company-friendly format. Insights-as-a-Service can, therefore, be understood as an advanced form of Information-as-a-Service. Hence, for the sake of this paper, the definition of IaaS is (following the definition by [6]: Information-as-a-Service describes a cloud service model in which a customer outsources the tasks of data analysis and interpretation to a specialized external provider that performs the service using a standardized scheme developed by or in cooperation with the customer company. The result is a service representation that offers the customer with company-friendly and user-friendly information that can be used to derive actionable insights on demand. This definition sees analytics-as-a-service, as in the analysis of data being conducted as a service to the customer company, as well as insights-as-a-service, the delivery of actionable insights as a service to the customer company, as a part of the more general concept of information-as-a-service. The connection between analytics-as-a-service, insights-as-a-service, and information-as-a-service can be then visualized as follows (Fig. 11).

5.3 Characteristics of Information-as-a-Service There are several essential characteristics to IaaS: • Transforms data into useable information: IaaS providers “generate information” from data sources which may be their own or from a third party and they then deliver that information to the client which has to “follow users’ business rules” and this way the company receives “data in enterprise-friendly or user-friendly format” [6]. • Not necessarily but best used with cloud computing: the ODCA writes, describing the “role of cloud in information as a service” that the advantage of using IaaS via

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the cloud is that both the “orchestration function” of gathering data from various sources and offering them effectively as information can be combined [31]. • Need not be DaaS provider: the IaaS provider can be a DaaS provider that adds analytics-service or insights-service on top his existing DaaS service, but may also be a separate company that uses data provided by third parties, as the illustration of [6] shows. • Follows company-specific rules—“standardized schema”: what [6] describe is a “standardized schema” which allows data to be put into a form that corresponds to the needs of the user company. The ODCA demands the same when it states that IaaS “should have the ability to provide standardized and secure methods […] from all available data in the right format […] to meet the business goals” [31]. • Enabled by using an API: The realization of IaaS necessitates the implementation of an Application Programming Interface (API) that “generates an open architectural environment in which multiple applications can share data” [6]. This is necessary for data to be transferred effectively between various sources and applications, as [6] put it, this “is helping applications to remove information sharing restrictions”.

5.4 Suitability Because IaaS allows access to analytics experts on demand, it is especially useful for a company that either does not have the financial or personal resources available to develop such skills in-house. Outsourcing the task of data analysis (analytics-asa-service) up to the point of deriving insights (insights-as-a-service) is a strategic decision that while enabling agility and profiting from external competence leads to dependence on external partners and prevents the development of in-house competencies. Generally, IaaS is especially suitable for companies that: • • • •

Are small to medium company size. Have no to low prior experience with data analysis. Have no to low availability of in-house data experts. Want to build a trusted network of strategic partners rather than in-house competencies. • Have a legal framework that allows for storing of data on cloud servers and sharing data for analysis by external partners and do NOT have data analysis as one of their core competencies. A thorough analysis of the following benefits and downsides should enable a company to make a qualified decision about the potential suitability of IaaS.

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5.5 Benefits There are four big benefits to IaaS [6]: • Rapid acquisition of meaningful information from service providers • No need for a messy collection of data: this applies to DaaS and IaaS alike. A specialized IaaS provider organizes the collection of data from various data sources either through data warehousing (DWs) or operational data stores (ODSs) [31]. A previously tedious and time-intensive task is outsourced to specialized providers while the need for in-house data experts is reduced or even eliminated. • No need to dig into a large amount of data: once the standardized schema has been created a user can let the IaaS vendor take care of deriving information from the data [6]. A user must no longer perform long manual examination and analysis of the data supplied. • No necessity to wrap up all data for results: as the IaaS vendor already delivers information in a clear and easy-to-understand service representation, the customer can utilize the information without having to put them together itself. Furthermore, services such as Insights-as-a-Service offer advantages like. • Access of expertise when it is needed without fixed costs. Data scientists are generally in short supply. Many companies don’t have or can’t afford to have a data scientist expert in the company full-time. By using an Insights-as-a-Service offering, the company can still benefit from the expertise when required [56]. • Benefiting from the expertise in case of new cases/scenarios the company has not had before. A McKinsey survey revealed that 86% of companies asked stated that at best they were “somewhat effective” when it comes to achieving their set goals for data and analytics [56]. • Operational expense instead of capital-intensive fixed costs. As SAS points out, as Insights are used as a service and only when needed, a company can typically declare its expenses for insights as operational expenses, instead of building longterm and fixed costs through investment in capita-intensive infrastructure [56]. • Increased speed. As data, analytics, and insights can be used as a service and no technical infrastructure has to be implemented on-premise, insights can typically be delivered much faster. As Capgemini describes one case, a process that used to take a retailer 10 h to load “has improved insight creation from 60 min to 60 s” [57].

5.6 Downsides However, utilization of any IaaS vendor, depending on the scope of the services consumed, comes with several downsides, including: • Increased dependency: handling this task to an external partner creates an increased dependence on this vendor and its quality of service. The external

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vendor may not have the oversight and understanding of the business required to perform high-quality service; good cooperation and clarification of needs at the outset are therefore required. • No development of internal analytics competencies: due to the analysis being performed and insights delivered by the external partner, the company does not develop these competencies themselves. As Big Data continues to grow in importance [3], this can be a competitive disadvantage to companies that develop these skills in-house. • The potential loss of sensible/confidential data: it can never be guaranteed that confidential information may not either be lost due to security issues or a leakage somewhere in the cooperation with the IaaS vendor. This applies generally to any data hosted in the cloud though.

5.7 Pricing Models Analysis of existing IaaS solutions on the market shows that there are different pricing models available: Deliverable-based pricing. One pricing model is based on the deliverable which the IaaS provider is to send to the end customer; such deliverables can be e.g. data set, presentation, or a report [58]. User-based pricing. A widely adopted pricing model is based on the number of users a customer may want to have. A monthly fee per user subscription is to be paid. For example, Salesforce uses such a model for its Einstein Analytics3 solution, or Tableau Software.4 Corporate subscription (Salesforce) or Seattle-based Tableau Software. Feature-based pricing. Another common pricing model is based on the features the customer has access to. As one example, Tableau offers a different set of features between the Personal Edition and Professional Edition of its service “Tableau Desktop”. Also, Oracle5 offers a Standard and an Enterprise Edition, whereby the latter is expanded by the number of features while offering all the features of the Standard Version as well.

5.8 Examples of Real-World Applications The most common use of IaaS is with the delivery of information between applications using an Application Programming Interface (API) [6].

3 https://www.salesforce.com/products/analytics-cloud/pricing/. 4 https://reviews.financesonline.com/p/tableau-software/. 5 https://cloud.oracle.com/en_US/oac/pricing.

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Fig. 12 Capgemini and its Insights-as-a-Service offering (captured from [57])

Two big players in the IaaS field are Capgemini and SAS. Capgemini offers a specialized service called Insights-as-a-Service which it describes on its website as a service that cares for data being “secured, cleaned, sorted and shaped into useful analytical insights” [57] (Fig. 12). SAS, on the other hand, speaks of “analytics-as-a-service” and calls its service “SAS Results”, describing it as a combination of “the expertise of SAS services with its award-winning software to help you develop more powerful analytical insights” [58]. The service can be deployed in the cloud or on-premises. Customers can get direct access to analysts and have the analysis of data be performed by data experts from SAS and have insights or results be delivered in the desired form of deliverable that is agreed before the beginning of the project [58] (Fig. 13).

5.9 Drivers • Shortage of skilled data experts: as SAS points out [56] there is an immense shortage of skilled data experts—demand outweighs their availability. Therefore, even if companies wanted to hire them full-time, many of them would not be able to. This acts as a driver for the establishment of specialized IaaS providers, that perform analytics and deliver insights on demand. • Need for competitive advantage: in a global marketplace where big data is trending and ubiquitous, companies are searching for competitive advantage through superior data and customer insight. The companies’ focus is therefore on gaining competitive advantage through the fast and qualitative derivation of insights from the mountain of available data.

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Fig. 13 SAS IaaS offering is called “Results” on website6

• The ever-growing amount of data: due to the trend of big data the amount of data collected skyrocketed in recent years and grew much faster than the ability to process or handle that data. As a result, companies are overwhelmed with the choice of data sources and types and try to separate true value from the noise [41]. This rapidly evolving data landscape has also led to companies developing more complex information architectures, which, as the ODCA is confident, drives the need for IaaS [31]. • Increased need for agility: agility has been claimed to be the key to business success in the twenty-first century [13]. In the aim to realize the full benefit of data and customer insights while remaining agile and maintaining fixed costs to an absolute minimum, it may be better to buy insights on-demand from expert providers than to invest long-term into the development of such skills in-house. 5.9.1

Structure of Cloud-Based IaaS Providers

The following illustration showing the relevant actors in an IaaS network [6]. The integrated parties are the data sources, the IaaS service provider as well as the users (Fig. 14).

6 https://www.sas.com/en_us/solutions/cloud-computing/cloud-analytics/consulting-services/res

ults.html.

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Fig. 14 Framework of IaaS (according to [6])

6 Comparison of DaaS and IaaS Along Discussed Dimensions Now that both of the concepts have been discussed individually, it is time to bring them together to compare and contrast the differences between them. Looking at the two definitions of DaaS and IaaS in the context of this paper, their connection can be visualized as follows (Fig. 15). In the DaaS case, it is only the access to data that is provided and turning it into information, by potentially enriching, segmenting, and interpreting the data, is left to the consumer. In the IaaS case, the provider offers additional services such as the creation of customized streams through which the consumer can access the information at any time, at the right place, for the right person, in the right form. More importantly, they offer automated and secure ways of collating, standardizing, integrating, contextualizing, value-adding, and aggregating data to turn it into usable information for customers. This is done by company and IaaS provider sitting down and putting together what [6] call a “standardized schema” for transforming data into “an enterprise-friendly or user-friendly format” (p. 28). It thereby fulfills

Fig. 15 Connection between DaaS and IaaS (own illustration)

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what the ODCA demands when it says IaaS “should have the ability to provide standardized and secure methods to create, manage, exchange, and extract meaningful information from all available data” [31]. Whether a company wants to choose DaaS or IaaS for their company is going to depend on various factors.

6.1 Criteria for Suitability of the Respective Format A company’s decision to become a DaaS or IaaS customer should comply with several important considerations, including company size, previous experience with data science and analysis, availability of in-house data experts, strategic considerations, legal framework, core competencies, and long-term growth potential. • Company size: Previous experience with data science and analysis: if a company has performed previous projects in terms of data science and analysis, it might prefer not to use an IaaS offering and instead conduct the analysis in-house. If such experience however is not present yet, then an IaaS provider will be a cost-effective and time-efficient solution. • Availability of in-house data experts: in the situation where a company already has data analysis experts in-house, an IaaS offering may not be meaningful. However, even if a company has data management skills, it may still profit from a respective DaaS offering as third-party data can enrich or complement existing internal data sets. • Strategic considerations: if a company determines in its evaluation, that it may too like to become a DaaS provider in the near future as it sits on data that could be interesting to other customers, it may be best to take a cooperative approach in becoming a DaaS or IaaS customer. This way the company can benefit from using big data, but also gain experience and build in-house expertise for a later-in-time launch as a DaaS provider itself. If the company however plans to grow quickly without having data analysis as a core competence, it may be best to build a deep strategic partnership with an IaaS provider so it can harvest the power of big data and data-driven insights quickly. • Legal framework: given the data quality and data security concerns mentioned for both DaaS and IaaS, the question is whether a company is legally allowed to host and perhaps share its data with other partners which an effective realization of DaaS and IaaS require. For companies or organizations in the public sector, for example, DaaS and IaaS realizations may be interdicted for legal reasons. • Core competencies: as companies seek to become more agile for competing in a global marketplace, if data analysis is a core competence of the business, but data management is not, a DaaS offering may be the best solution. If a company doesn’t have lots of experience in data analysis and deriving insights, it might opt for an IaaS offering.

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• Long-term growth potential: if the company intends to grow quickly then it may prefer to simply utilize external partners to provide the required insights to achieve the desired growth. If a company determines however that it wants to develop into a DaaS or IaaS provider itself in the long-term, it may decide to develop the skills in-house (perhaps in combination with consulting from DaaS/IaaS providers). Hence, a company should rather consider choosing DaaS instead of IaaS in case of: • • • • • • •

Big company size, Medium to high prior experience with data analysis, Good availability of in-house data experts, Build a trusted network of strategic partners rather than in-house competencies, The legal framework allows for storing of data on cloud servers, Core competencies include data analysis, Seeking to grow more slowly and develop in-house competencies in data analysis.

6.2 Summary of the Key Findings In the following Table 1 are summarized key findings from our research to compare DaaS and IaaS.

7 Conclusion 7.1 Synopsis In this paper, the concepts of DaaS and IaaS were analyzed in terms of characteristics, drivers, benefits, and downsides, as well as their suitability for companies. They were researched for similarities and differences with the clear result that they are more similar than different. IaaS is an extension of DaaS. IaaS vendors typically offer the same services that DaaS vendors do but complement them by utilizing a scheme to organize data into the enterprise-friendly and user-friendly information for customers. Data is sourced from various providers, built into a hub, and then put into a service representation for final consumers utilizing collation, aggregation, standardization, data derivation, and additional measures. Depending on how far these services of specialized companies go, we can distinguish between analytics-asa-service where analysis of data is handled and insights-as-a-service that goes even further in providing companies with actionable insights on-demand. Both analytics-as-a-service and insights-as-a-service are seen as a subset of IaaS offerings. While DaaS already provides customers the benefits of more agility, higher cost-effectiveness and reduced time to analyze and gather data, IaaS goes beyond

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Table 1 Comparison of DaaS and IaaS accross multiple dimensions (own interpretation) Dimension

DaaS

IaaS

Characteristics

Multiple data sources Different types of data Relevant actors Real-time data On-demand access Storage is provided

Transforms data into useable information Not necessarily but best used with cloud computing Need not be DaaS provider Follows company-specific rules—“standardized schema” Enabled by using an API

Suitability

SMEs without large data sets Companies want to enrich their data sets Companies with in-house analytics experts Companies without data management expertise Companies cannot afford a full-time data scientist

Small to medium company size No to low prior experience with data analysis No to low availability of in-house data experts Want to build a trusted network of strategic partners rather than in-house competencies Have a legal framework that allows for “sharing” of data Core competencies do NOT include data analysis

Benefits

Agility Cost-effectiveness Data quality

Rapid acquisition of meaningful information No need for a messy collection of data No need to dig into a large amount of data No necessity to wrap up all data for results Access to expertise when required, e.g. in case of new cases/scenarios Operational expense instead of fixed costs Increased speed

Downsides

Data security Data quality Governance Privacy Expertise

Increased dependence No development of internal analytics competencies A potential loss of sensible/confidential data

Pricing Models Request-based Volume-based Data-type based Corporate subscription

Deliverable-based Consumption-based User-based Corporate subscription Feature-based

Actors

Data source IaaS provider IaaS consumer

Data source DaaS provider Data consumer

(continued)

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Table 1 (continued) Dimension

DaaS

IaaS

Drivers

Engaging customers with data-driven choices Monetization Public sector and government Technology shift Pioneering organizations

Shortage of skilled data experts Need for competitive advantage The ever-growing amount of data Increased need for agility

in offering customers freedom from diving into deep data analysis and providing relevant, actionable information and insights on-demand and at adequate costs. As both the DaaS and the IaaS market are predicted to further grow over the next years, the industry is going to see further cooperation between customers and DaaS/IaaS vendors as well as the development of core competencies in data analysis and information presentation on the side of specialized DaaS/IaaS vendors. In return, companies are going to focus more and more on their core competencies and benefit from increased agility as DaaS and IaaS services are outsourced to specialized vendors. This is also necessary because as the importance of DaaS and IaaS grows, not only big companies but also SMEs and start-ups have to be able to tap into the power of big data and DaaS and IaaS if they are to compete in a global marketplace. This is also a strategy to deal with the acute lack of data experts and analysts in this still young industry [56]. It is therefore essential that both customers, vendors, managers, and researchers alike have a clear understanding of DaaS/IaaS and understand that IaaS transfers more tasks from the customer to the vendor. Each company is required to take an in-depth analysis of their own data needs, usage patterns, and preferences and make a qualified decision whether IaaS or DaaS is adequate for them. The main aspects to pay attention to are the core competencies of the business, the type of industry, the size of the company, the availability of data scientists, previous experience with data providers. Specific attention needs to be paid to the legal framework in which the company acts. Concerns of security, privacy, and data quality must be weighed and effectively approached. before a decision to be made. Finally, as the importance of DaaS and IaaS grows further, more and more companies need to examine as well, if they do not potentially have the required data resources that other companies could be interested in. It is possible that a company merely considering to become a customer of DaaS or IaaS vendors may have the potential to become a DaaS or IaaS vendor itself, by licensing and providing relevant data to complementary businesses. New business models will be developed, and new sources of income can be generated.

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7.2 Further Research While a lot of important findings have been made in this study, there are various limitations need to be kept in mind. Firstly, due to the dynamic and innovative nature of the topic, there are only a few peer-reviewed sources that serve as the foundation of this comparison study. Most of the information has been gathered and compiled from white papers and articles published by companies that while at the heart of innovating and determining the future of cloud computing, might also represent their commercial interests in their published documents. This was accepted as a given shortcoming of the study and all reported findings have therefore been as much as possible been scrutinized and checked for multiple mentions to prove their accuracy. Naturally, this is a quickly evolving field that has gained traction in the last 2– 3 years. Most of the findings in this work has hardly been covered or documented in scientific research yet. It is research institutions by big companies like IBM or Gartner themselves that provide most of the data and findings to date on this topic. Already, some companies argue that neither DaaS nor IaaS is going far enough, claiming what exactly businesses need is Insights from the derived data and information, hence the term Insights-as-a-Service has been coined by companies like. Secondly, the internet of things (IoT) is generating a tremendous amount of data. According to [59] “The Web is the largest data repository in the world, this implies a big hidden potential for those who will utilize available knowledge to improve their business. The importance of the intelligent Web-based information systems with capabilities to discover useful knowledge through analyzing a huge amount of content and its structures is growing.” As a result, DaaS providers will be challenged to integrate this data created and companies have to learn to be able to utilize this data and integrate it into their decision making by effectively gaining insights from it. Data scientists and researchers have to work together to find new and more effective ways of deriving information and insights from ever-growing amounts of unstructured data that are produced “from social networking sites, sensors and satellites” [47]. There is a lot of future research that has to be conducted. Academic researchers need to catch up with the evolving trends in the cloud landscape and can assist with their research to determine common standards and best practices as well as a reliable framework for the implementation of DaaS and IaaS services. The need of the further research was identified also in [60]: There is a need for research into “Insights-as-a-Service” that operates as an integrated function i.e., it jointly considers function-centric orchestration in data movement, machine learning, data sharing and computing for ‘ubiquitous analytics purposes’. Such an Insights-as-a-Service paradigm can help us handle the fact that data and processing will be increasingly distributed in nature and (sometimes) federated. Moreover, as mentioned in Sect. 6, DaaS and IaaS also need to be approached from the perspective of companies potentially becoming data or service providers themselves.

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Researchers can help by providing clear models and definitions of the terms and technologies being used, to avoid customer confusion and provide more transparency for all involved agents.

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Management and Measuring Customer Loyalty in Digital Marketplace—Analysis of KPIs and Influence Factors in CLTV Wolfgang Neussner

Abstract In a highly competitive digital business environment, the management of customer loyalty becomes particularly important, as new customers can only be won at considerable expense and in manageable numbers. It is essential to strengthen customer loyalty to the company in order to ward off competitive marketing campaigns in the best possible way. Thus, the aim of this research is to analyze and compare the concept of bonus programs in the retail industries of Austria, Germany and Switzerland. The starting point of the loyal customer as the basis of a successful customer value management, in the context of maximizing enterprise value, is the necessity of customer loyalty and emotional bonding. The research is supplemented by the development of purchase decision processes. Besides, the implementation in companies is quantitatively surveyed and compared with the theoretical concepts.

1 Introduction 1.1 Relevance In a saturated and highly competitive environment, the management of customer loyalty must become particularly important, as new customers can only be won at considerable expense and in manageable numbers. The aim is to strengthen customer loyalty to the company in order to ward off competitive marketing campaigns in the best possible way. For example, customer loyalty programs, in which existing customers are rewarded (monetary or non-monetary) for their repurchasing behavior, are used to try to bind existing customers to the company. However, the possibility of unnecessarily reducing profits can also be seen if customer behavior cannot be controlled as desired.

W. Neussner (B) Faculty of Management, Comenius University in Bratislava, Bratislava 25 82005, Slovakia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_4

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2 Theoretical and Conceptual Background 2.1 Customer Relation Management Loyalty programs can be understood as marketing programs designed to generate customer education by offering benefits to profitable customers [1]. However, Henderson et al. consider it an incentive system which influences customer behavior in the sense that consumer behavior is still improved irrespective of price or assortment changes [2]. Customer loyalty programs can also be seen as the structured set of marketing measures that rewards desired customer behavior [3]. Bonus programs are part of Customer Relationship Management (CRM). The goal is the long-term improvement of the profit potential. Key Performance Indicator is the Customer Lifetime Value (CLTV) [4]. This is calculated from the balance of all revenues and costs of a customer over the duration of the business relationship. Quantitative and qualitative components must be taken into account. The main qualitative factors include recommendation, cross-selling and up-selling potential. Since the duration of the customer relationship is a key input parameter, it makes more sense to calculate CLTV dynamically than statically [5]. Main factors influencing customer value are customer loyalty, cross-selling and up-selling potential, the reduction of customer service costs and other value-enhancing potential, such as recommendation behavior. Customer loyalty is intended to generate loyal customers who deliver greater profits for companies, since acquisition costs are not incurred with every purchase. The increasing purchasing power in a person’s life cycle can also have positive effects. [4, 84, 85]. Hofmann [6] defines (see Fig. 1 [6]) the influencing factors for declining customer loyalty on the one hand on the provider side and on the other on the consumer side. The main reasons on the supplier side include market saturation, increasing price competition, the variety of offerings, a lack of innovative strength, homogenization of offerings due to the concentration of suppliers, price transparency due to new media (addition of the author: in addition to the Internet, also an increasing number Influence factors of offer side

Influence factors of demand side

- Market penetration / Increasing price competition - Experience Society and Hedonism - Variety of offers - Variety Seeking - Lacking innovative power - Emacipation of customer behavior - Homogenisation of the offer - Price awareness / bargain mentality - Price transparency through new media - Online shopping - New operating forms - Increasing mobility - New distribution channels / Increase of online distribution ↓ ↓ Decreasing loyalty in consumer markets ↓ Increasing relevance of customer loyalty as marketing target

Fig. 1 Influence factors on the customer loyalty [6]

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↓ Formal legal loyalty

Increase of change barriers ↓ ↓ Technical Economic functional Loyalty loyalty

Bondedness

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↓ Psychological Loyalty

Connectedness

Fig. 2 Increase of change barriers [6]

of social media channels), new business forms and new distribution channels. On the consumer side there are changes concerning the experience society, variety seeking, emancipation of the consumer, price awareness, bargain mentality, online shopping as well as the increasing mobility, which creates more possibilities than before [86–88]. The resulting decline in loyalty in the end consumer markets automatically leads to an increased relevance of customer loyalty as a marketing objective. Motivated by this, the goal is to raise the barriers to change through a customer loyalty program as explained in Fig. 2 [6]. Hofmann [6] distinguishes in this context between the formallegal, technical-functional and the economic bond in the sense of being bound and as a clear demarcation the psychological bond also as a bond in contrast to being bound. Hofmann [6] also subdivides the exogenous factors influencing customer loyalty into situational factors (attractiveness of competing products and lack of time) and personality psychological factors (convenience, need for variety, price awareness, involvement, aspiration level and willingness to relate) as shown in Fig. 3 [6]. As mentioned above, customer loyalty has an impact on profit and thus on the value of the company. Derived from this, the systematic evaluation of customers by their purchasing behavior takes place and is included in the company evaluation. Kumar and Reinartz [7] show a model (Fig. 4 [7]) with the detailed calculation of the measure from the business point of view of customer loyalty, namely the CLTV. Figure 4 [7] presents the calculation of the LTV. Recurring revenues are reduced by recurring costs, which results in the contribution margin, which is discounted in connection with the customer duration and a discount factor to be selected. Afterwards the result is reduced by the acquisition costs to receive the LTV. Customer Lifetime Value Management (hereinafter CLTV-M) has aligned all sales and marketing activities in the company with customer value. This serves to maximize the company’s profit, based on a strategy of customer orientation, which is reached through a conscious non-equal treatment of all customers “the right measure for the right customer”. In the author’s opinion, this should be supplemented by the component “right time”, since this could lead unnecessary costs spent too early or a lost customer spent too late could be the result. Higher expected profits also justify higher or non-standardized acquisition costs. The main task of the CLTV-M is therefore the adequate selection of the right instruments at the right time.

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Situative influencing factors

Personality psychological influencing factors

- Attractivity of the competitor´s offer

- Comfort

- Lack of time

- Need for variety - Price consciousness - Involvement - Demand level - Relationship readiness

Fig. 3 Exogen influence factors of customer loyalty [6]

Recurring revenues Contribution margin Recurring costs Lifetime of a customer

Lifetime profit

Discount rate

Acquistion cost

LTV

Fig. 4 Customer Lifetime Value (CLTV) [7]

Bolton et al. [8] see the use of marketing instruments (service quality, direct mailings, relationship instruments, reward programs as well as advertising and distribution) as a way of perceiving the customer (price, satisfaction, commitment) explained in Fig. 5 [8]. If the instruments are chosen to suit the customer, this will be reflected on the one hand in the customer’s behavior (repetition, additional and crossbuying behavior) and on the other hand in the resulting costs and revenues and thus ultimately in CLTV. Figure 6 [5] shows the demarcation between product, process and value orientation in the company. The starting point is that the company´s organizational structure shows a product management and a sales unit (product orientation). The process orientation complements the product orientation with the levels of customer marketing and customer care/retention, where the value-oriented approach has been expanded to include CLTV-M. The product orientation has been expanded to include CLTV-M.

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Fig. 5 Customer asset management of services [8]

Product Orientation

Product Management

Process Orientation

Product Management

Value Orientation

Product Management

Sales

Sales

Sales

Customer Marketing

Customer Care, Customer Retention

CRM

Customer Marketing

Customer Care, Customer Retention

Value Lifetime Management

Fig. 6 Structure of customer lifetime value management [5]

This also shows (see Fig. 6) that conventional (one-dimensional) strategies (cost leaders or quality leaders) must be developed in a value-oriented approach to multidimensionality in order to be able to live customer value in all dimensions. CLTV-M is therefore not an organizational unit, but a target for the creation and maintenance of profitable, sustainable customer relationships. In estimating the expected CLTV,

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valuable customers are treated individually, and less valuable customers standardized. The assessment in valuable and less valuable is carried out by socio-demographic characteristics, the obtained turnover with the help of the analysis of the life cycle of the customer. The monitoring of a customer’s intrinsic value is given very high priority, which is also measured continuously based on the availability of data on individual customers. In this way only those customers are to be bound who are worth it to be bound [5]. In addition to the aspects mentioned above, the relative sales development could also be added as a key figure. The challenge in the conception of such a bonus program is to bind the customer to the company and not to the bonus program. Even if companies regard the bonus program exclusively as part of the marketing mix, customers only see the totality. The consequence of this may be that a bonus program that is not perceived as serious or the products and/or services offered as bonuses are not perceived as qualitatively meeting the requirements, and the products and services may also be perceived as inferior. For example, a bonus program that is perceived negatively can also have a negative impact on a company’s sales [9]. Loyalty expresses the customer’s affiliation with the company or a brand. The following distinctions regarding the degree of brand loyalty can be found in the literature: “Hard-core loyalty” refers to customers who buy only one brand from a company at all times. In terms of customer loyalty, these are the target customers that all companies want. “Spilt loyals” are those which consistently purchase two or three different brands from different dealers. This happens because no reason or obligation is seen to show exclusive loyalty to a brand [10]. “Shifting loyals” include those customers who occasionally change brands from different companies [11], whereas “switchers” have no ties to any brand and very often switch between different brands, different businesses [11, 12]. If customers regularly buy from the same company and have little opportunity to switch to competing companies, this is referred to as “Behavioral loyalty” [13] “Attitudinal loyalty” is the term used when a customer gives a brand a strong preference [14]. “Attitudinal loyalty” leads to positive recommendations through “word-of-mouth propaganda” [13]. Customers with a “cognitive loyalty” have a willingness to pay higher prices for products or services compared to other providers [13]. Uncles et al. [15] define “Monogamous Loyalty” as 100% loyalty to a single brand and “Polygamous Loyalty” as loyalty to a portfolio of brands in a product category. Customers can be either in connection with a company (the net benefit lies in the customer’s perception of the company or a state of connection to the customer loyalty program). In the second case, the condition is covered by a change barrier, which restricts customer freedom [16]. However, it is only possible to speak of customer loyalty if net benefit aspects or barriers to switching are the triggers of repeat purchases [17]. A habitual buying behavior can in no way be understood as customer loyalty [18]. This classification is due to the fact that the customer would have been retained as a customer even without the customer loyalty program.

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2.2 Customer Loyalty Program In order to maximize CLTV, it is possible to bind customers to one’s own company and to increase it through additional purchases and repurchases. Ranzinger [19] differentiates customer loyalty instruments into bonus programs, discount cards, customer cards without regular incentives, point gluing campaigns and couponing. As can be seen in Fig. 7 [19] bonus programs are divided into single and multipartner programs. Thus, advantages can be collected either only with one or several enterprises. Notwithstanding the single bonus program, products or services from other companies can also be offered as benefits. The multi-partner programs usually have only one player from an industry on the market without further competitors from the industry. Discount cards can be issued as single or multi-partner cards. It must also be distinguished whether the discount is an immediate discount at the cash desk or a refund at the end of the year. The refund at the end of the year can be in the form of money or vouchers of the company. The disadvantage of customer cards without regular incentives is that they are not shown at the checkout every time a customer makes a purchase due to the lack of an advantage, which means that data on customer behavior is not recorded even though the customer is aware of it. Irregular coupons are sent and can be earned without showing the customer card. Point gluing actions can be carried out with or without address acquisition. From a predefined purchase value, customers receive adhesive dots. After the collection of a predefined number of adhesive dots, these can be redeemed partly with partly Potential Customer Retention Tools ↓

↓

Bonus Program

Rebate Cards

Single Bonus Program

Multi PartnerBonus Program

↓ Customer Card without continous Incentivation

↓

↓

Points Collections

Couponing

Single Rebate Cards

Discounts without Adress Registration

Coupon (mail)

Mulit Partner Rebate Cards

Discounts with Adress Registration

Coupon (customer brochure)

CheckoutCouponing Mobile Couponing Couponing within Bonus Programs Coupon- /Rebate Platsforms Web

Fig. 7 Potential customer loyalty tools [19]

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without additional payment. When redeeming, there is the possibility of collecting personal data in order to be able to use them for marketing purposes. In the case of couponing, a distinction is made according to the distribution channel (mailshot, customer magazine, checkout process, mobile, as part of bonus programs and platforms). Couponing can be implemented by industry funded discounts on special products or by pre-defined discounts on all products [19]. In addition to the Ranzinger categorizations, Minnema et al. [20] see the possibility of the permanent and immediate rewarding of sales through bonuses. For example, the effects of an Instant Reward Program (IRP) with bonus awards on consumer purchasing behavior are investigated. An IRP is a fast-growing form of short-term program that immediately rewards consumers with small rewards per sales made, which are part of a wider range of collectibles. An additional element in many IRPs promotes specific brands with an additional premium known as bonus rewards. Bonus rewards are the additional rewards that consumers can earn by purchasing a particular advertised brand, which is a non-price promotion related to the IRP. Therefore, consumers can earn rewards in two ways: based on the sales made and the purchase of the advertised brands. To test the impact of these marketing tools, Minnema et al. use Dutch household panel data from 23 product categories in four supermarket chains. Consumer buying behavior is analyzed by modeling the number of shopping trips, frequency of purchases at product category level, brand choice, and volume of purchases. The results show that an IRP leads to incremental shopping trips. The promotion of a brand with a bonus and a discount compared to a pure discount leads to higher selection probabilities for the advertised brand. Finally, IRP and bonuses are particularly effective for households that collect the bonuses, but also positive, albeit smaller, effects can be seen for households that do not collect bonuses. In summary, IRP increases the number of purchases, premiums increase the share of the promoted product and product category, but have a lower effect on non-collective consumers [20]. While many studies have investigated consumer purchasing behavior in reward programs, there is a lack of a better understanding of customer solution behavior, especially when promotions influence a core aspect of reward programs—free rewards. Montoya and Flores [21] investigate the impact of a promotion on purchase and reward redemption in a reward program where consumers can partially cover the cost of a free reward with their money. The literature on rewards programs indicates positive reinforcement through redemption of rewards, while the literature on promotion provides different views on purchasing behavior after rewards are redeemed. Data from a major retailer’s reward program was used to determine whether such a promotion attracted customers with less transaction activity and shorter maturities. As a result, consumers using the promotion increased their preference for hedonic rewards compared to their previously observed behavior. This change in preference remained in place even after the termination of the action. Overall, the campaign significantly increased the number of redemption requests, but had a negative impact on subsequent consumer behavior by reducing the frequency and volume of purchases [21].

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2.3 Bonus Schemes One possibility of a customer loyalty program is a bonus program. Bonus programs serve as a means of customer retention. A clear definition is not given in the literature. For example, Lauer [22] defines bonus programs as “when a systematic offer is made by companies to customers to collect specifically created value units (bonus points) for certain behaviors, which can be converted into benefits (bonuses) above a certain size (redemption threshold). Künzel [23] defines the goal of a bonus program as a strategic marketing instrument for customer loyalty, whereby the rewards for the customers [23] in proportion to their purchasing behavior. Diller [24] on the other hand, sees bonus programs as rebate systems for customers who receive rebates in kind or cash bonuses after achieving predefined values (purchase quantities or points). Minnema et al. speaks of an Instant Reward Program and emphasizes the immediacy of such a program [20]. As different as the approaches to the definition of a bonus program may be, they all have four characteristics: • • • •

The bonus program runs over a relatively long period of time. Participants are rewarded for predefined behaviors. The participants of the bonus program collect units of value. The participants of the bonus program will exchange these value units for bonuses or rewards at a later date [4].

A distinction must be made between systems where participants can only collect and redeem points at one or more companies due to their purchasing behavior. There is also the possibility of using the bonus systems Business to Business and Business to Customer [9]. The first bonus program to be mentioned in the literature was that of American Airlines in 1981 [25]. Bonus programs have their origins in the airline business and trade, although today other industries such as banks, insurance companies or energy companies offer bonus programs. Bonus programs are strongly influenced in the retail sector by greater digitization (e-commerce) and supra-regionalization of formerly individual businesses. The rapid progress of e-commerce providers is also leading to the digitalization of bonus programs [4]. According to Lauer [22] the basic mechanics of bonus programs work as shown in the Fig. 8 [22]. For a predefined behavior (e.g. turnover), the customer registered in the bonus program receives bonus points (discounts or status points), which he can exchange for a bonus performance when reaching a redemption threshold (minimum turnover or minimum number of points). From the point of view of the company, the registration of the customer generates more knowledge about the individual customer, which leads to customer-specific offers and ideally ends in cross/upselling. Functions of a bonus program are.

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Fig. 8 Mechanism of bonus programs [22]

1.

2. 3. 4.

Identification function: the participants are identified, and their buying habits are recorded. Sociodemographic data are recorded, and a map is usually used for identification purposes. Bonus function: predefined behavior is rewarded. Interaction function: the identification (see 1.) also enables targeted interaction with the participant. Service function: Services for participants, such as free credit card or ticket service [9].

Implementing the design possibilities of bonus programs [9] a combination of the following instruments should be considered. The target group is defined as businessto-business and/or business-to-customer. The extent and quality of the coverage must be determined and possibly also achieved in the form of cooperation. Should repeated shopping behavior be positively rewarded and this be defined by entry barriers, rewarding the behavior, defining point heights and the collection medium (card or app). Which channels should be used for communication with the participants (direct mailing/customer magazine/hotline/posters/TV). Should the redemption of points be made more difficult (bonus threshold/gradations/expiration of points) or easier (co-payment, access). The benefit is offered to repurchasers in the form of money, vouchers, material prizes, experience prizes or a status program.

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For bonus programs, a distinction is made between multi-partner programs and bonus programs without partners. Cross-industry and therefore non-competing companies join to form multi-partner programs. This is usually handled by a specially founded company, which acts as a service provider and is financed by the participating partners. In return, the company takes over the entire processing, such as advertising, customer data management and the provision of premiums. The best-known multipartner programs in Germany include Payback, HappyDigits, which was founded by Deutsche Telekom, DeutschlandCard and the bonus program of Lufthansa, Miles and More. Bonus programs without partners are offered by individual companies that do not have any cooperations or collection partners, which serves the purpose of clarity [9]. Lauer sees only four ways to bonus credit. A distinction must be made between status points and discount points. Collection points may be provided by own products/services or by third parties. If the customers are not motivated by the bonus to the desired behavior, the bonus program loses its meaning. The dimensions of the bonus according to Lauer [4] are shown in Fig. 9 [4]. The first subdivision of bonus benefits distinguishes between economic and rational benefits. Economic benefit is understood to mean those products and services which could be acquired with the help of financial means even without membership, whereby the customer receives a measurable advantage (in monetary units). The (exclusively) emotional benefit, on the other hand, cannot be measured in monetary terms and cannot be acquired with money either. Since the monetary benefit can also lead to feelings, a clear separation is not possible and reasonable and leads Lauer to the following differentiation into four dimensions: Discount, extra services, status and fun and experience. A clear demarcation of these four models is often not given, whereby the best combination should be developed. By definition, the rebate is not granted immediately but only after thresholds have been reached. Since the discount is only paid out afterwards, it is also referred to as cashback. The advantage of the discount as a bonus option lies in the simplicity of the availability and logistics of

Fig. 9 Dimensions of bonification [4]

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the bonus (money) and practice over decades. The big disadvantage, however, is that little or no emotions can be aroused [4]. The financial test carried out by Stiftung Warentest in August 2010 quoted the Gesellschaft für Konsumforschung (Gfk) as saying that cardholders of the cash back program provider Payback in Germany made 25% more sales with their Payback card in the third year of their participation than in the first [26]. Another example is ABCO, where the launch of a baby club generated 25% revenue growth in 6 months due to the consolidation of the share of total spending [27]. The meaningfulness of a bonus program for every company must be denied. If a company already has sufficient information about customers and their purchasing behavior or if there are insufficient resources available to analyze the generated data, a bonus program will not contribute to the positive development of the company (company characteristics). Bonus programs are designed to prevent customers from migrating to competitors. If there is a contractual or psychological dependence on the existing supplier or service provider, a bonus program will not increase customer loyalty (market characteristics). A high heterogeneity of the target customers leads to a high cross-selling potential, which can be exploited by a bonus program (customer characteristics). If the relevant competitors all have bonus programs, it must be considered whether the programs will not (must) be aligned in the long term. If a bonus program is not an industry-specific minimum requirement, it should be dispensed with (competitive features) if it is not based on promising, affordable differentiation. The fact that the conception of a bonus program must be thought through is also due to the fact that well-known companies such as Subway, American Airlines (note: reintroduced), eBay America, America Online have discontinued their bonus programs. The art lies in not being so generous that margins erode, but still generating additional sales and profit margins [27]. In 2010, Stiftung Warentest examined 29 bonus programs for their data protection conditions and rated four as acceptable [26]. 2018, the DSGVO [28] tightened the data protection conditions.

2.4 Requirements for the Conception of a Bonus Program The construction of exit barriers is essential. The creation of exit barriers occurs when an unfaithful customer would have to forego a service or bonus if he switched to a competitor because the competitor did not offer it or would not accept it. If a customer buys comparable products/services from several providers, a bonus program aims to increase the customer’s share of total expenditure. Even if a competing supplier offers a comparable system, already acquired points or status should make a change unattractive. A convex bonus (meaning that the more money spent, the higher the percentage refunded) is one way to motivate customers to bundle spending with one or a few vendors. The introduction of different status levels can

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also lead to a concentration of expenditure. The concern for a status and the associated benefits (see airlines) can lead to expenses owed solely to the non-loss of status [9]. Steinhof [29] reports increased customer loyalty following promotion to the status hierarchy of a bonus program. The attempt of some managers to give the company’s customers increased status is viewed critically. This is where emotions, customer gratitude and customer skepticism come together. It would be wrong to assume intuitively that if one “does something good” for the customer, this is also perceived by the customer without restriction, even if the customer is considered with advantages which, strictly speaking, he is not (yet) entitled to within the scope of the bonus program due to his purchasing behavior. The customer does not assume that he can actually expect a “gift” from the company and reacts with skepticism and the expectation of the company’s self-interest. Thus, when designing a bonus program, consideration must be given not only to the expected positive but also to the unexpected negative reactions. If the customer status is designed in such a way that it is not perceived as a “pure gift” by the customer, the skepticism of the customer is reduced. This can be achieved by the fact that the customer is not forced to ascend the status, but must actively give his consent, whereby the customer retains control and can act in a selfdetermined manner and/or this has already had a proximity to the status ascent. This contributes to the reduction of customer skepticism and the gift customer status leads to a loyalty increasing customer gratitude and enables the preferred customer status as a possible measure within the scope of bonus programs. This leads from a past to a future-oriented classification of customers in the sense of CLTV. Thus managers of companies can develop potential customers to the “desired” customers by the given customer status, provided that the status striving of the customers can be used without their concern of overreaching for the company in the sense of re-purchases or additional purchases. As a result, less profitable customers can currently be developed into significantly more profitable customers for the company in the future. Thus, the correct use of the donated status is just as promising for the company as the status the customer has developed himself. [29] The design dimensions of bonus programs according to Hofmann [6] (see Fig. 10 [6]) include the collection mechanism, redemption mechanism and bonus offer. The collection mechanism (process of collecting bonus units) can be granted in the form of bonus units (proportional, staggered or s-shaped), where the awarding rules and the reference value (sales, miles, etc.) as well as time and amount must be clarified. Customer loyalty should also be controlled on the basis of allocation rules and reference values. The awarding rules can be applied on a constant, cyclical or action basis. While the action-related pursuit of the action targets is the result, constant allocation rules reward the continuous behavior of the customer, which is also the most common variant. Cyclical behavior does not reward individual behavior, but behavioral constancy. Examples include basic bonuses independent of consumption, such as birthday or Christmas vouchers. Bonus allocation is usually linked to turnover, sometimes to distances (see airlines) or quantities.

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Parameter

Dimensions of bonus programs Collecting mechanism

Redeem mechanism

Bonus offering

Constant award of bonuses (proportional, graduated, s-shaped)

Redemption tresholds

Bonus charakter (utilitaristisch / hedonistisch)

Aktionsbezogene related Vergabe of bonus units

Rules of expiration bonus units

Connection of the bonus to the main business (business oriented / non business oriented)

Cyclical award of bonus units

Possibility of additional payment (voluntarily/required)

Fig. 10 Dimensions of a loyalty program [6]

The redemption threshold must be regulated in the course of the redemption mechanisms. The rules are for the expiry of bonus units as well as the possibility of voluntary or required co-payment. In the area of premiums, these can be sociopsychological (image, exclusivity, experience) or hedonistic (fun, joy). The bonuses those have already been collected and not yet redeemed serve as a protective shield against customers migrating to competitors and can be regarded as a withdrawal barrier. Redemption thresholds are the values that must be reached in order to redeem the units already collected [6]. The psychological effect of redemption [30] was established by Nunes and Dreze in a study in which they were able to clarify that immediately after redemption, the purchasing frequency of customers decreased by almost 40%. The motivational effect of reaching the redemption threshold is thus documented. Furthermore, it could be demonstrated that low redemption thresholds as well as closely related redemption thresholds do not constitute a sufficient incentive for consumers. Point expiry rules make sense from an entrepreneurial point of view, as otherwise provisions must be formed and timely information about the future expiry of the bonus can have a control effect on the customer [6]. Earning the bonus is the core benefit of participating in a bonus program. The proximity of the premium offer to the core benefit can be designed on the one hand to be performance-related or more performance-oriented. The necessity and usefulness of customer-specific offers led Tesco to produce four million different variants of its mailings in 2004. A redemption limit adjusted to the individual sales is essential. This must not be too low (in order not to be easily interchangeable with other providers), but also not prohibitively high, so that potential participants in the bonus program are deterred from participating because of the unrealistic goal. Furthermore, a disproportionate bonus for the registration for the bonus program is recommended, because the “felt” distance to the first bonus seems not unreachable. Studies where bonus programs required the same turnover, but where a start-up bonus was given away, had about twice the participation rate. Analyses of the customer behavior of bonus programs show that luxury or entertainment articles are more popular as bonuses than everyday products [9].

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The effectiveness and efficiency of bonus programs is often questioned in the literature, which is why relevant studies and results are summarized below. A successful customer loyalty program is an investment by companies in longterm relationships with their customers. However, to be effective, customer loyalty programs must be perceived as valuable by customers. So et al. [31] proceeded a study to examine the different types of values that customers derive from loyalty program membership and the relationship between program value, program loyalty, and brand (company) loyalty. In addition, the influence of program and brand loyalty on behavioral responses, including the share of wallet, share of purchase, word of mouth and willingness to pay more, was investigated. The moderating effect of the program adjustment and the duration of the customer loyalty program membership of the customer on the relationship between loyalty to the program and loyalty to the brand was surveyed. Based on 628 respondents from the two largest independent retail loyalty programs in Australia, it was established that the loyalty program value consists of six primary constructs that promote loyalty. These include reward attractiveness, knowledge benefits and effort that affect the perceived experience benefits of customer loyalty program members, which in turn affect program loyalty; while values derived from group membership and disclosure convenience promote brand loyalty. Furthermore, it was surveyed that program loyalty influences brand loyalty; and program and brand loyalty together lead to positive customer behavior. However, program loyalty has a negative impact on a customer’s willingness to pay. The results show the influence of several program value elements on customer loyalty and expand the literature by clarifying the relationships between program value, attitude loyalty and behavioral loyalty. In practice, the findings show how managers can better design and implement their customer loyalty programs to build customer loyalty [31]. Shainesh et al. [32] have asked themselves in the context of their work how customers develop from brand loyal customers to company loyal customers. In the first step, it was established that loyalty to the customer loyalty program on the one hand increases the perceived functional value of the brand and on the other hand also increases commitment to the brand. Furthermore, it was found that the increase in loyalty to the customer loyalty program also increases the effectiveness of brand communication. Kieningham et al. [33] see a consistently critical stance towards the prevailing myths about customer loyalty. In contrast to Levitt [34], author of one of the most quoted articles ever, who sees customer loyalty over products as a management priority, customer loyalty is not regarded as the highest goal because customer loyalty can be purchased. As a second point, the meaningfulness of the investments in retaining customers instead of acquiring new customers is not generally affirmed, but rather made dependent on the phase of the product life cycle. In the introductory phase, product awareness and product acceptance will be in the foreground. In the next phase (growth), brand awareness and market share are the top priorities, whereas in the saturation phase the focus is on defending market shares in combination with profitability. In the downturn phase, however, management must decide whether to equip the product with new features, focus on reducing costs and focusing on a niche or abandon the product. A fundamental concentration of all customers

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will not be recommendable due to the different profitability. Kieningham et al. [33] divide customers into preferred customers, break-even customers and customers with whom money is lost. Companies with the highest customer loyalty do not automatically have the highest number of customers. The goal of changing customers into loyal customers is being questioned, as these customers are looking for variety. The danger of excessive marketing efforts to win these customers exists. An exclusive focus on customers is questioned, but the combination of customer and brand orientation is recommended. The assumption that retaining customers is more profitable than winning new customers is just as questioned as the assumption that acquiring new customers causes more costs than retaining a customer as a loyal customer. Using “share of wallet” as the top key figure for price-sensitive customers is not conducive to success, as there may always be competitors who offer their products at lower prices. Furthermore, it must not be assumed that customers will not change their behavior and will show comparable behavior in the future. Many loyalty programs are designed in such a way that members earn points, and these points have practically become a currency with a monetary value. Multiplying the point money value by the number of points required to redeem a premium result in the “point price". Dannaher et al. [35] compare this point price with a corresponding market price in order to determine whether the participants in the customer loyalty program are adequately rewarded for their efforts to earn points. To achieve this, nearly 7000 items from six loyalty programs from three countries were analyzed and it was found that the point price is on average higher than the market price, which is not advantageous for the acceptance of loyalty programs. A survey among the members of the Fly Buys program (author’s note: this is the largest Australian Reward program according to his own information) has shown that point prices are very important. It was tested how important it is to the members that the point prices do not exceed the market prices. It was found that if the point price exceeds the market price by only 10%, that more than half of respondents are slightly or very angry, many to the extent that they want to leave the loyalty program [35]. Despite the strong use in marketing practice, the effectiveness of loyalty programs is still strongly questioned by researchers. In a study by Kreis and Mafael [36], an empirically tested framework is presented that regards customer loyalty programs with their different designs as a moderating instrument in a middle-end relationship between customer motives and value. The results support the argument that customer loyalty programs can be an effective tool and not only increase the value of a product or service, but also create value. However, this is only the case with programs that target the prevailing customer motives and thus offer a higher perceived value [36]. According to Kang et al. [37] loyalty programs lead to the formation of the Customer-Company Identification. The empirical results of the study show that nonfinancial benefits of loyalty programs can promote customer company identification by evoking the customers’ sense of status and belonging to a corporate community. Relationship marketers interested in building customer identification with loyalty programs should therefore design appropriate non-financial rewards to strengthen and confirm customers’ feelings of status and affiliation. As study results it can be

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mentioned that bonus programs are an effective instrument to promote the identification of customers and companies and those non-financial rewards strengthen the customers’ sense of status and identification with the company [37]. In their study, Gomez Garcia et al. aim to determine which personal characteristics of customers can determine the probability of participating in a customer loyalty program for food retailers. Five aspects were taken into account: Price sensitivity, search for variety, shopping pleasure, attitude to loyalty programs and a personality trait (data protection). Gomez Garcia et al. aim to identify the difference between customer profiles attracted by two of the most common types of loyalty programs currently used by food retailers: a reward program and a loyalty card. The two types of programs show differences in the way they are managed and assume that the drivers of the probability of participating in each program are different. The study was conducted using logistic regression with a sample of 600 customers from a Spanish supermarket chain. The results show that a certain type of customer is more likely to participate in these programs: those who have little shopping pleasure, who care a lot about privacy, and who have a positive attitude towards loyalty programs in general. In addition, differences were observed between the factors influencing the probability of participation in reward programs and customer cards [38].

3 Bonus Programs in Austrian, German and Swiss Retail From February to April 2019, 52 bonus programs were recorded and categorized. After some companies offered more than one program, the programs of 44 companies and two multi-partner programs were examined. The company’s homepages and the brochures available in the branches served as sources for the conclusion of a membership in a bonus program. The analysis thus covered bonus programs, six German, three Swiss and 35 Austrian (several dealers have several programs which differ either in status or target group) retailers. Forty-eight bonus programs address private individuals and four companies. Whether the privately addressed bonus programs could also be used by companies is unclear throughout. Some conditions presuppose a minimum age, which would suggest purely private use. The survey covered single or multi-partner programs offered to private individuals or companies, the possibility of cross-border use of the cards, the possibility of reaching a status, the possibility of reaching a status, redemption thresholds, offers, coupons and the availability of an app as demonstrated in Table 1. Of the 52 programs, only two are multi-partner programs, from which it can be concluded that the advantage for merchants of having exclusive access to customer data outweighs the consideration of sharing the costs of the program. Two companies offer their members a differentiation via a status to be reached and another company a differentiation via a free and a paid version of the bonus program. 20 out of 52 programs offer the possibility to collect points, the remaining ones do not. In order to make the customer a returning customer, 28 programs provide for a threshold value (minimum turnover) in order to benefit from advantages, one of which orients

Austria

Austria

Austria

Austria

Austria

Austria

Austria

Conrad

Dehner

Öamtc

Libro

Hartlauer

Bauhaus

Penny

3

4

5

6

7

8

9

10 Leiner

11 Obi

12 Lidl

13 Lutz

14 CCC

15 Marionnaud

16 Esprit

No

Austria

Austria

18 Deichmann

19 Humanic

No

No

No

Austria

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

Yes

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Yes

Yes

Yes

No

No

No

No

Yes

No

No

Yes

No

No

No

No

No

Yes

No

No

Yes

Yes

Yes

No

No

No

Yes

No

No

No

Yes

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

No

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

No

No

No

Yes

Yes

No

Yes

Yes

Yes

No

Yes

Yes

No

No

Yes

No

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

No

Yes

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

(continued)

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Yes

Company/private Mulitpartner Single Status Collecting Ttesshold Coupons Offers App Online Offline poi

17 Esprit Platinum card Austria

Austria

Austria

Austria

Austria

Austria

Austria

Austria

Conrad

2

Austria

dm, BP, Nordsee, Fressnapf, etc

Country

1

Company

Table 1 Loyalty program survey (own illustration)

168 W. Neussner

Austria

Austria

Austria

Austria

Austria

24 Douglas

25 Intersport

26 Billa

27 Astro

28 bständig

No

No

37 Pagro-Pädagoginnen Austria

38 Triumph

Austria

No

Austria

36 Pagro-Company

No

No

Austria

No

Austria

33 Akakiko

No

No

35 Pagro

Austria

32 Salamander

No

No

No

No

No

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Yes

Yes

Yes

No

Yes

No

No

No

No

No

No

Yes

No

No

No

Yes

No

No

Yes

Yes

Yes

Yes

No

Yes

No

Yes

Yes

10th purchase

No

Yes

Yes

No

No

Yes

Yes

Yes

Yes

No

No

No

Yes

No

No

No

Yes

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

Yes

Yes

No

No

No

Yes

Yes

Yes

No

Yes

No

No

Yes

No

No

Yes

No

Yes

No

Yes

Yes

No

No

No

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

(continued)

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Company/private Mulitpartner Single Status Collecting Ttesshold Coupons Offers App Online Offline poi

34 Delka

Austria

Austria

31 Hervis

Austria

Austria

23 Kika

Austria

Austria

22 Bipa

30 Merkur

Austria

21 Palmers Basic Club

29 P&C

Austria

Country

20 Palmers Diamond Club

Company

Table 1 (continued)

Management and Measuring Customer Loyalty in Digital Marketplace … 169

Austria

Austria

Germany No

CH

Germany No

CH

CH

40 Triumph Gold

41 Tchibo

42 Karstadt

43 Migros

44 Lafayette

45 Manor

46 Coop

Germany No

48 Hunkemöller

49 Ikea

Germany Yes

51 Rossmann

52 Edeka

No

Austria

Germany No

50 Bellaflora

No

Germany No

Austria

47 Budni

No

No

No

No

No

No

Austria

39 Triumph Silber

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

No

No

No

No

No

Yes

Yes

Yes

No

No

No

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

No

No

Yes

No

Yes

No

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

Yes

No

Yes

No

Yes

Yes

Yes

Yes

No

No

No

Yes

No

No

Yes

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

No

No

No

No

No

No

Company/private Mulitpartner Single Status Collecting Ttesshold Coupons Offers App Online Offline poi

Country

Company

Table 1 (continued)

170 W. Neussner

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the threshold value not on turnover but on the number of purchases, whereby the value-based consideration is replaced by a quantity-based one. 43 programs offer special promotions for participants of the bonus program, but only 32 discounts through coupons. This could be due to the reduced effort in communication as well as in handling at the cash desk (collection, devaluation etc.). However, these 32 programs offer both coupons and promotions. With 25 programs, less than half of the information on an app is available, leading many merchants to use mail, email and one merchant even to use SMS messaging. Only one could be identified as a transnational program. Four of the programs offer no monetary bonuses for purchases, another four offer an instant rebate, two of them offer a discount coupon, three cashback, 31 a credit on a purchase, and the remaining discount vouchers or combinations in multiple options. The achievement of the thresholds can be determined either by achieving a turnover or a predefined number of purchases. Of the 31 schemes offering a credit, 21 have linked this to the exceeding of a threshold, whereby not every euro of turnover leads to additional expenditure in the form of a credit if this threshold is not exceeded. Discount coupons lead to an unforeseeable expense for the retailer in the form of the discount, because this is to be regarded as a percentage of the turnover. In the case of discount vouchers, on the other hand, the next purchase could be paid in full with this voucher, depending on the amount. Five programs offer an instant discount on every purchase, which is attractive to the customer, but the retailer does not take any action to motivate the customer to make a new purchase by redeeming credit. Cashback programs automatically do not lead to any further turnover, as the money is refunded to the cardholder in cash and thus the motivation to make a new turnover in order to enjoy an advantage is prevented. Two programs are subject to a charge, one of which provides a voucher in the amount of the charge, thus creating an incentive to make a turnover. The communication with the member of the customer loyalty program takes place via the customer magazine, other companies via email, mail, sms. Nine programs do not express in their promotional materials whether or not they communicate with members of the loyalty program. A transnational system offers only programs, many exclude this, and some program information does not express itself. Crossborder collection and redemption would lead to greater accounting effort, and the members’ credit balances would have to be shown in the balance sheet as liabilities of the program providers, considering a redemption quota. In summary, the results of the study are shown in Fig. 11. Of the 52 singlepartner and two multi-partner programs analyzed, none uses multi-partner discount cards, not even the multi-partner programs, as these are cashback programs. Only few companies offer birthday coupon, free of charge dispatch, birthday voucher, best price guarantee, member get member advertising or a prolonged right of return. A single program does not regularly address customers about incentive opportunities and no company offers point gluing promotions. Couponing, on the other hand, uses 33 programs. Six programs do not offer their members any benefits that are related to the sales made. Thus, no binding of the program to a customer behavior can be expected. It is worth mentioning that not all programs enable the generation

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Potential Customer Retention Tools (52)

↓

↓

↓

↓

↓

Bonus Program 52

Rebate Cards 43

Customer Card without continous Incentivation 1

Points Collections 0

Couponing 33

Single Bonus Program 50

Single Rebate Cards 43

Discounts without Adress Registration

Coupon (mail)

Multi PartnerBonus Program 2

Mulit Partner Rebate Cards 0

Discounts with Adress Registration

Coupon (customer brochure)

CheckoutCouponing Mobile Couponing Couponing within Bonus Programs Coupon- /Rebate Platsforms Web

Fig. 11 Survey on 52 bonus programs (own illustration according [19])

and redemption of points online despite webshop, whereby offline customers are not motivated to become online customers.

4 Results Evaluation and Conclusions A comparison of the bonus dimensions offered between literature [4] and the market shows that neither immaterial experiences nor material bonuses are offered. Status symbols in the form of higher classified cards and higher service levels occur selectively. Only a few companies offer different levels of customer cards to their clients. It appears that these companies have realised that not all customers should be treated equally and have therefore made a distinction in their customer retention policies and programs. Cash is offered exclusively in the form of cash back programs. Thus, the discount is in the foreground. There is a substantial discrepancy both in the design and implementation of the programs observed. Also, the ambiguity in the documentation of the programs about whether the cards can be used online and offline shows that the

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merchants omit possibilities to collect customer data. The non-utilization of essential components of bonus programs in the literature shows that there is still potential here or that they are deliberately not used. Elements of programs which are only part of one or few programs are e.g. birthday coupon, free of charge dispatch, birthday voucher, best price guarantee, member get member advertising or a prolonged right of return. Whether cash back or bonus programs are the more attractive form of customer loyalty from the customer and company point of view remains to be seen and, just like the digitalization of bonus programs, the effect on the expansion to offline and online offerings in the sense of Omni Channel Retail would still be an area to be researched in detail, which would have to be extended by the measurability of the results of the individual activities within the framework of a bonus program. Limitation of this paper is the lack of knowledge about the success of the relevant loyalty programs. Basis for the review would be the costs and the benefits over a time period of several years. The question arises as to how long companies can still afford or want to grant discounts without consideration, e.g. customer data. From the management´s point of view it will be important to have the possibility to measure the CLTV at any time and the single sales initiative per single customer card holder. Further research will be necessary to compare scientific concept of CLTV and the realization and the efficiency in retail companies. Further research is needed to explore the reliability of current loyalty programs and the CLTV as measurement tool of marketing activities. From the authors’ point of view, one possibility of customer retention not yet mentioned in the literature is the widespread possibility in Austria of selling pricereduced vouchers from dealers via works councils. This procedure, which has been common in Austria for decades, leads to employees buying reduced-price vouchers from works councils. The works council has agreed reduced prices for these vouchers with dealers in advance. An analysis of this possibility is still pending. In the next step the relevance and the potential of these price-reduced vouchers will be analyzed from the position of the works councils, customers, and retailers.

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Cost-Effective Solutions in Cloud Computing Security Lumbardha Hasimi

Abstract The popularity and advances in technology, recently have created a great deal of interest in cloud computing, especially for enterprises. Although the cloud computing platform offers a cost-efficient solution, there is a big drawback when it comes to security and the real costs behind it. Depending on the type of deployment and service, outsourcing security is a big concern for the provider, as well as for the client regarding the security itself and the impact on the overall performance of the cloud. Most of the security designers propose high-level assurances using cryptography while making sure to maintain the benefits of outsourcing. Anyhow, there are many challenges and issues with respect to privacy and security of the cloud that need to be addressed and analyzed. This work aims to present some of the most efficient existing solutions for security in cloud computing, present a short overview of the progress in literature and research that tackle such issues, and finally investigate the models and methods of calculating the costs of security in cloud computing. While engaging qualitative and quantitative methods, different analyses were carried out to finally present the state-of-art in cloud security research and, present the existing cost calculation methods.

1 Introduction 1.1 Relevance Cloud computing as a framework has become an important option for many enterprises over the last years. The capability and the solutions offered, followed by the cost of outsourcing, performance, scalability, and availability are the main reasons for this. business organizations and different agencies are the sources of the widespread

L. Hasimi (B) Comenius University in Bratislava, Odbojárov 10, 83104 Nové Mesto, Bratislava, Slovakia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_5

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interest in cloud storage services, by promoting the effectiveness and low-cost benefits from the cloud [1–3]. The economic benefits are a great motivation to adopting cloud as they have a direct impact on capital and operational expenditures. Anyway, despite all the motivational features, cloud computing in its core bring several specific security issues that are mainly due to its multitenancy characteristics. There are many security and privacy issues in cloud computing that needs to be tackled in order to have an overview of the possible costs and investment needed to overcome such situations. Regardless of cloud service and the nature of the enterprise, there have been presented some of the most common threads in the cloud environment including data breaches, data loss, hijacking, insecure APIs, denial of service, etc. Dealing with such issues means dealing with the diversity of these services [4], which in return increases the vulnerability of two incidents and attacks. Most of cloud providers invest a lot in risk and security issues. However, taking into account the diversity of such concerns in the advancing field of technology, this issue is hard to tackle in terms of expected costs expenditure. In this research, it is addressed the issue of security in the cloud in regard to costs and investment. The work follows a three-layered research approach where the outcomes of the layers are impacting the consecutive layers [5–7]. In the first part, it is explained and discussed the overall framework of cloud computing as well as the structure and the mechanism. The major issues regarding the service in cloud computing the architecture and the models of deployment offered are explored in detail. Secondly, an overview of the issues related to security and risks, the underlying issues, strengths, and the way these issues affect cloud security are investigated thoroughly. It is then followed with a short scientometric analysis, to investigate and explore the literature available in this topic. Finally, by presenting and discussing the issues in security of cloud computing, the security techniques, and solutions, as well as going through the existing methods of course calculations in cloud security-rich amount of knowledge will be attained and therefore give the foundation for further development in developing models that will be useful in evaluating the security costs specifically. This work’s main objective was to find out some of the methods and models available to calculate the cost of security in cloud computing. The questions aiming to be answered encompass on different research sub-questions that deal with interrelated phenomena in cloud computing covering, available solutions, the existing situation in research and literature, and investigate the most common models of security cost calculations. Concerning the structure of the work, the first section of the paper comprises of a general background in the area of cloud computing services and security issues. Followed by the second section that consists of short scientometrics analyses to present the state of art in the field of costs of security in cloud computing, intending to present the available literature and research done previously. The third section consists of the objective and the aim of the work, data collection methods, data analyses, data processing, and the overall engaged methods and strategies. The fourth section presents findings and results regarding the solutions and models available to calculate costs of security in cloud computing as well as an in-depth discussion of the major issues that come alongside in the field of security. Like a sum-up of the analyses conducted in the review of the existing literature, in the conclusion section

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is done and overall concluding word accompanied by the possibilities and ideas for further research and work in the field of security in the cloud.

1.2 Goals and Objectives This work addresses cloud security issues and challenges and eventual cost-effective solutions regarding three aspects to conclude the guidelines for the topic. It follows a three-layered research approach [8], while every layers’ outcome is subsequently related an affective to the consecutive layer. In the first part, it is explained and discussed the overall framework of cloud computing as well as the structure and the mechanism. The major issues regarding the service in cloud computing the architecture and the models of deployment offered are explored in detail.Further, it is given an overview of the issues related to security and risks, the underlying issues, strengths, and the way these issues affect cloud security are investigated thoroughly. further, it is also presented and inside on the actual situation in the research productivity relating the cost of security in cloud computing. Scientometric analyses including Co-authorship Co-citation, Relative Rate Growth parameter, and, other indicators in the research situation are presented. Such investigation and exploring in the literature [5, 9] is performed with the purpose to measure and help understand the nature of the problem as well as conceivable deficiencies regarding the methods and approaches in the field. Finally, by presenting and discussing the issues in security of cloud computing, the security techniques, and solutions, as well as going through the existing methods of course calculations in cloud security-rich amount of knowledge will be attained and therefore give the foundation for further development in developing models that will be useful in evaluating the security costs specifically. This work’s main objective was to find out some of the methods and models available to calculate the cost of security in cloud computing. The questions aiming to be answered encompass on different research sub-questions that deal with interrelated phenomena in cloud computing. The other objectives of this work are: • Present the most efficient existing solutions for the security in cloud computing • Present a short overview of the progress in literature and research in this topic • Investigate the models and methods of calculating the costs of security in cloud computing

2 Theoretical and Conceptual Background 2.1 Cloud Computing as a Cost-Effective Solution Cloud computing is the computing model in which computing resources such as software, hardware, and data are accessed as a service usually through a web browser

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or light-weight desktop machine over the internet [10–14]. A normal cloud contains many computing resources, like servers, application platforms, storage and devices, balancers, and the infrastructure and/or virtual machines that cloud clients use. Cloud computing as the technology in development, provides great potential with the upto-date range in IT, especially for businesses and data storage issues. This is a great extent especially for the fact that it offers a great feature of data storing on the remote servers, that can be accessed anytime and from any location, respectively. The provider of the cloud service offers access and service to the user, accordingly to the needs and specifications. The information technology services are delivered through cloud computing by retrieving the resources from the Internet with webbased tools and applications rather than having a connection to a server [15]. Another definition sees cloud computing in two meanings [11]. The most common refers to running workloads remotely over the internet in a commercial provider’s data center, also known as the “public cloud” model [11, 16]. This comes most probably due to the fact that the most popular cloud offerings are well recognized and frequently used—like Amazon Web Services (AWS) and Microsoft Azure, which explains why the “public cloud” model is a known notion. The second meaning [11] describes how cloud computing works. It is seen as a virtualized pool of resources, from raw compute power to application functionality, available on demand. The key advantage is agility: the ability to apply abstracted compute, storage, and network resources to workloads as needed and tap into an abundance of prebuilt services [17]. On the other hand, according to Flexera [18], the State of the Cloud Report shows that multi-cloud continues to be the leading strategy, as resulting from the surveyed enterprises and its number of adopting it. In this context, it is stated that the most common multi-cloud approach among enterprises is a mix of multiple public and multiple private clouds. Nevertheless, the cloud computing concept through the internet offers accessible resources as services [19]. What stands as the main driver for cloud computing, are the economic benefits, which is shown to be mainly due to the reduction in expenditures in the capital and operational activities [20]. However, this benefit fades when we consider issues and challenges yet to be discussed. As the major ones to mention are the security and trust issues, given that the user in the cloud leaves the protection realm of the data owner, it becomes more of a dependent owner of the service certainty. Thus, why is cloud computing a cost-effective solution? It is obvious that with the business growth, the IT needs to grow as well, which leads to choices between investing in new server infrastructure on-premises or invest in in the cloud base infrastructure [21–24]. Therefore, it is very important to know which investment is better for the business and which will have a greater effect on long term profitability [25]. Such a decision is difficult to make as it is not as common to properly acknowledge the benefits and limitations of on-premises and cloud-based infrastructure [26]. Taken into consideration the research done so far, it is proven that investment in the cloud is probably the best option in terms of costs, availability, and, flexibility [27]. There is however a drawback when it comes to the real cost of it, given the security dimension [27]. For most of the big enterprises that deal with sensitive data and

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information, the “going cloud” option at some point has its biggest risk in terms of security and trust. So, what are the main benefits, excluding the security issues, that cloud computing brings? Primarily, the costs. Most businesses find the costs the most attractive factor in deciding on an investment. While considering the price of computing, traditional onpremises server infrastructure, and cloud infrastructure are carried out differently, as well as varying factors into the cost of IT, and often cloud computing services are the most cost-effective and efficient [28]. Some studies try to prove that the cloud can provide extensive financial benefits and workplace productivity [29]. According to a study conducted by Rackspace.com in 2013, which surveyed 1300 companies, it was found that 88% of cloud users experienced significant cost savings and 56% of them noted an increase in profits. However, for many others, this is always case-specific. In a survey conducted in 2015 by the European Parliamentary Research Service [20] about the in-depth analysis of cloud computing, the cost-reduction benefits were among the biggest drivers for the enterprises to accept cloud deployment (see Fig. 1). According to the same survey, cloud computing can bring important benefits to both organizations and individuals. Perhaps the most obvious benefit is cost reduction. On-site ICT facilities are generally over-provisioned to allow for future growth or spikes in demand. The result is that four out of every five companies adopting cloud computing were able to reduce costs by 10–20% [20]. On-Premises Servers. This highlights the capacity to do work, by investing in the physical hardware. An on-premises server can offer consumers a great deal of power but usually, this power is underutilized. The business pays for this on-time regardless of how much the system is being used. Whether that is in the form of electricity to keep the server running all night, or in maintenance costs for a server administrator to monitor the system, this is where cloud computing stands ahead [21].

Fig. 1 Benefits of cloud computing according to the survey [30]

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The work performed. Taken into consideration that the cloud provider maintains systems on a massive scale each data center [31] deals with thousands of clients’ data, the efficiency is at its peak. This consequently passes the savings of economies of scale to your business [32], which would not be possible in cases of on-premises or individual server infrastructure. By investing in cloud computing it is seen to invest in the resources that are actually used. Instead of paying for RAM, storage space, processing power, and so on, you pay only for the service with no cost for underutilization, or electricity, repair, upgrade, etc. [20]. Taken into consideration all these elements of IT infrastructure operations and all the overheads related to it, it is obvious that paying only for the service and the resources you use at the time that you use, it’s much more convenient, and thus has much more financial advantages [33]. Overall, by leveraging cloud services and cloud-based infrastructure instead of purchasing their server, most businesses get a high benefit [31]. By using cloud services you are getting included in a monthly fee the management, maintenance, operating costs while paying for the processing power only instead of capacity off the server, which in return saves you money over time [21].

2.2 Cloud Computing Services In cloud computing the service models are divided or categorized into three basic service models accordingly to the business need that is addressed toward the cloud resource. Infrastructure as a Service (IaaS). Is the most basic service from the cloud service models, it offers to the customer raw computing, network transfer, and storage [34]. This service is offered to the customer as an operating system that comes with the server that has storage and network transfer. At this point, there is a possibility to deliver the service as a single server or as a collection of integrated servers into a virtual private data center [35]. The company that is providing the software also provides the infrastructure to run this software. Infrastructure as a Service gives business access to vital web architecture, such as storage space, servers, and connections, without the business need to purchasing and managing this internet infrastructure themselves. Choosing to use an IaaS cloud demands a willingness to put up with complexity, but with that complexity comes flexibility. Amazon EC2 and Rackspace Cloud are examples of IaaS [36]. Platform as a Service (PaaS). The very next service offered by the cloud framework is Platform as a Service, which is basically the application environment purchased by the customer. As known examples of this layer of service in the cloud, are application stacks: Java, Ruby on Rails, LAMP. The developer can buy an entirely functional development environment. “Platform as a Service (PaaS) clouds are created, many times inside IaaS Clouds by specialists to render the scalability and deployment of any application trivial and to help make your expenses scalable and predictable” [36]. Examples of Platform as a Service system might include Google App Engine, Mosso, etc. What comes as a great advantage at this

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point with PaaS, is that for quite a small expenditure it is possible to initiate the application without having to deal with basic development issues [34]. Moreover, PaaS permits scalability of a great deal, due to its design and features of cloud computing [37]. Especially in cases of lean operations staff, PaaS can be exceptionally valuable on the off chance that the app will fail [36]. The biggest drawback, however, while using PaaS is that the service in certain situations may employ restrictions that might not go along properly, with the product. Software as a Service (SaaS). It is considered as the highest layer in the cloud with regards to the services of cloud computing. The customer purchases the use of a working application. Examples of this are NetSuite and SalesForce.com [28]. In this offered service third party vendor manages the software and it is delivered to the end customer by web [38]. Through running the application on the computers that actually belong to the vendor, the applications of the cloud enable the leverage on it by reducing the maintenance [39], operations, support, etc. Gmail for example is a SaaS run as clouds, however not all SaaS needs to be cloud-based.

2.3 Deployment Models in the Cloud Cloud deployment is a specific configuration of environmental parameters such as the accessibility and proprietorship of the deployment infrastructure [7]. Thus, the types of deployment in cloud computing variety depending on who controls the infrastructure and where is it located [40]. Usually, the companies should aim for the model that suits past their needs to make the best use out of it. Features in the deployment type should be taken into consideration from the businesses or customers’ features like computing, networking, storage, resources, goals, and, certain specifications of the model [31]. Accordingly, to the kind of activity, there are different requirements in privacy, availability, cost, etc. Though last years, we have witnessed the increase of the businesses adopting the cloud as an option to improve efficiency, quicken time and flexibility, and benefit from the accessibility of the cloud. However, it is quite case-specific, how the business utilizes the cloud that makes a crucial turn to the advantage level or not. As a first step toward going cloud, the business faces the deployment models variety [41, 42]. To this extent, cloud infrastructure and placement of each workload depend on business needs [43]. The existing deployment thereof, are available to the businesses in different offerings and options in the cloud [44]. The deployment models in the cloud are available as public, private, hybrid, and multi-cloud (Fig. 2). According to the latest stats from Flexera [19], the most common multi-cloud approach among enterprises is a mix of multiple public and multiple private clouds. Public Cloud. Public cloud offers to the businesses the option of virtualized computing, networking services, storage through the public internet from a cloud service provider [16, 17, 46]. A public cloud is usually a good option for businesses that need quick access to two computing resources without a lot of costs in advance

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Fig. 2 Cloud computing deployment models [45]

and further investment in infrastructure [27, 47]. This option of the cloud is considered easy to scale since you have the opportunity to buy the capacity in the amount needed and whenever needed. A great benefit for the businesses is that public cloud services do not need a lot of investment start and they are set up is pay-per-use. this helps the customer especially in speeding time, scaling quickly as well as offer the agility on trying new applications and services. “Public cloud services are especially useful for workloads that may run for a short period—for example, a start-up that can’t afford to wait months to prove its viability can get just the right amount of computing it needs, for just as long as it needs it. Plus, your IT team won’t need to maintain the hardware” [7]. Some of the largest public cloud service providers are Google Cloud, Microsoft Azure, IBM, Amazon Web Services, etc. Each of the providers that are available in the market in large and small capacities has its own services utilized and customized. However, regarding certain workloads, and especially for businesses that deal with legacy applications and sensitive data, deployment in the public cloud has another level of difficulty and risk. Therefore, private clouds come of better use to engage. Private Cloud. Private cloud is the best option in cases of businesses they deal with legacy applications for which the security is the greatest concern. This mainly because the data is managed in control of how is shared and stored [48]. The private cloud requires data centers maintained and hosted by the team of the organization, which means the organization has to install the hardware to deal with ongoing management and operational costs. Despite the lower profitability in terms of cost expenditures and maintenance especially when it comes to physical hardware, private cloud is

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the ideal solution for the businesses that want to control the resources and data an eventually have a more secure solution in long term [49, 50]. In terms of privacy risk and security again private cloud can bring the most cost-efficient solution considering the cost that the information breaches and other security issues can bring [41, 51]. The private cloud gives on-demand data availability, ensuring reliability and support for mission-critical workloads, and because it is controllable on how resources are used, it is quickly responding to changing workload demands [52]. Hybrid Cloud. A hybrid cloud is the combination of public cloud and private cloud environments end’s enables data and applications to be shared [53] among them. Therefore, such a feature helps businesses level services interchangeably [7] between their private infrastructure and at the same time use the public cloud resources. Multicloud. Multicloud is made of more than a single cloud service from more than one provider whether it is public or private. The strategy of multi-cloud in an essence is the use of two or more cloud computing services, referring to do any implementation of software or platform as a service [17, 40, 54]. Due to the nature of the workload of different businesses each business has its particular requirements, therefore needs specific combined services from different cloud service providers and sometimes combines it with their own private cloud. As an approach, it gives more flexibility over different services capabilities locations, and prize options. In the implementation, it needs careful planning in a strategy carefully analyzed to create consistency for the business and maintain independency of the services that are consumed. It requires a software layer to be able to deliver management as well as synchronize the activity across the cloud environment. It is the fact that this approach gives the best of both the private and public cloud [54] with a great deal of flexibility to run workloads, which makes it the most used approach among all the enterprises (Fig. 3).

Fig. 3 Multi-cloud strategy for most of the enterprises [19]

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A quite challenging decision when it comes to migrating cloud is how to choose the right deployment model for the business. Before choosing the deployment model it is important not to stick to one size fits all approach, whether it is wise to conduct an assessment on the needs and dependencies of the business drivers. Considering that organizations are quite dynamic and throughout the activities, it is quite possible to engage changes in goals as it is important to consider workloads and the eventual need for control and long-term costs while migrating. It is important though, and challenging at the point, when it comes to shifting from on-premises to cloud, as it requires to consider many sides, like a technical requirement, specifications, and certain prerequisites.

3 Concerns Regarding Cloud Computing and Security 3.1 Challenges in Cloud Computing Security Despite the many advantages that cloud computing brings, for most of the businesses that continue reservation toward migration in cloud, security, and privacy problems of the framework remain the biggest drawbacks. Considering the nature of cloud computing which means easily accessible files from computers through the Internet a highly possible malware and virus infection makes it even more suspicious when it comes to sensitive data. In the survey conducted by RightScale [19] in 2018, which questioned 997 technical professionals across a broad cross-section of organizations about their adoption of cloud infrastructure, security was among the top challenges (Fig. 4.). But that’s not the only issue, security drawbacks are also in terms of control. Loss of data, availability, damage of data, or eventual breaches of information are all issues of loss of control [55]. There are many cases and examples of big enterprises

Fig. 4 Cloud computing challenges RightScale survey 2018 [19]

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going through data loss issues and not being able to ensure data retrieving. Cloud computing is seen always in terms of security and reliability however compared to other networks, cloud computing is quite secure as usually, the service vendors utilize the security and its management through multiple systems [56]. Some studies state that cloud computing is not insecure and that security issues can be dealt with easily if the cloud is managed and accessed securely [57]. Up to date, there are available cloud computing security architectures and solutions from different service providers that address this concern, as discussed further in this work. However, conform technical specifications and evolution, the IT governance standards play a significant role [58]. Taken into account that information security has a very important role in supporting the activities of the organization in the cloud, it is tremendously necessary to have a standard or benchmark which regulates governance over security, these standards should function as fundamental guidelines for corporate secure electronic commerce on the global scale [59]. Several of the standards for righty governance that contain information security awareness are PMMM, ISO27001, BS7799, PCIDSS, COSO, SOA, PRINCE2, etc. Most of the studies conducted, classify the security risks into groups, accordingly to the intensity of the issues they can cause. For example, according to the report by ENISA1 [32], the security risks are classified as loss of governance, lock-in, isolation failure, management interface compromise, data protection, insecure of incomplete data deletion, malicious insider, customer security expectation, and the availability chain. Whereas according to CSA there are top nine threats insecure APIs, denial of service, malicious insiders, abuse, insufficient due diligence, shared technology issues, which will be discussed further below. While mentioning the security issues, it is evident that the security issues should be tackled in all the service models [48, 60]. Hence, it is important to also analyse the security issues accordingly to the model of the service, in this way to clarify the issues and eventually present countermeasures accordingly.

3.2 Some Major Challenges Cloud computing has brought resources and services that have changed once and forever the industry of computing. Bringing a new era of computing by developing service models that deliver business supporting technology more efficiently in the first place, the cloud has also brought a new stage of data security challenge. Further classifications have been done, categorized in bigger groups that share eventual roots on the issues of security. In Fig. 5, the classification of the issues of security has been done by first grouping into three main factions such as communication issues, architectural issues, and client management issues [38]. Though to date, different research and organizations have classified the clouds’ security issues in different groups, CSA [61] has narrowed the grouping to nine fundamental threats. Below 1 ENISA-European

Network and Information Security Agency.

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Fig. 5 Classification of security issues in cloud computing [38]

listed accordingly to the severity level as analyzed by CSA, the top nine threats of the cloud environment: Data Breaches. Data breaching concepts refer to any malicious or unauthorized retrieval of sensitive or confidential, taken data from the corporate network. Data Loss. Data is the most valuable asset foreign entity in the cloud therefore its prevention from loss is crucial. A big threat for a company is the data loss due to potential incapacity to prevent it [61, 62]. It can happen for different reasons such as computer freezing, server crash, human error, etc. Account Hijacking. Account hijacking happens when a malicious intruder uses the stolen credentials to enter transactions, insert false information call mom divert abusive sites, which leads to legal issues for the service providers. Insecure APIs. This happens in cases when application programming interfaces that are used for communication with the cloud services are weak or not sufficiently secured [61]. In such cases accidental or malicious attempt to violate them exposes the data to eventual security threats which leads to inflexible access control, scalability, monitoring limitations and, many other issues. Denial of Service. This is a very serious threat especially for organizations and businesses that are fully dependent on 24/7 services. as an initial face of the issues with the DoS, it is the denial of the excessive data the car storage, even by their authorized users, which attacks the server by sending thousands of requests [33, 61] and in return makes it unable to respond to the regular clients. Malicious Insiders. It usually refers to a person that enters a cloud network intending to harm the organization’s confidential data assets by penalizing financial damage, call stagnation in the productivity, install malware for their own purposes, sabotage the system, still information, etc. These are people who have legitimate access do the systems and data information. Abuse of Cloud Services. This refers to the issues for cloud service providers and it raises a number of serious implications for the vendors. To crack the encryption

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key usually takes yours for the attacker using limited hardware however in cases of using an array of cloud servers this crack can be completed in minutes. Insufficient Due Diligence. It is very important for the organization and businesses to perform extensive and regular due diligence before deciding to go cloud [61]. It refers to the care from the staff that should be taken before entering an agreement especially in the cases of transactions with other parties. Shared Technology Issues As the main feature of cloud computing, sharing technology is difficult in terms of obtaining a strong insulation property for the multi-tenant architecture. It is the responsibility of the service provider to offer scalable service to the customer without interfering with the other client’s system [63]. However, this does not mean that the responsibility in the cloud environment is only of the provider, the security is a responsibility of both parties. It is evident that the number of threats in the cloud environment is quite diverse and complex therefore the analyses of the risk are very important. The security and privacy of both parties not only in certain vulnerabilities but also in the enter exchangeable activities [64]. Thus, many of the cloud computing providers and analysts try to come up with solutions that minimize the threats and challenges concerning security and privacy. Some of these solutions are discussed further in the next section.

3.3 Security Issues in Cloud Services Considering the cloud computing framework is build containing three service models on top of each other, the security issues, as well as risks, are inherited from one to another [57, 65]. For this reason, the system is seen as a whole and the security remedies are provided for the whole secure environment. The main issues and challenges and there are three layers of the cloud are presented below. Security issues in SaaS. As this is considered is the highest layer in the architecture of cloud computing, the providers of the service try to replicate the data in various places to ensure efficiency and availability. At this point, the customer is dependent on the security mechanism offered by the provider to protect the data and the applications that are being stored along with other companies and individuals [66]. In this layer, there are basic security issues that should be considered to avoid threats in data manipulation and data storage. During the SaaS deployment and development, the provider should consider matters such as data security, network security data confidentiality data integrity, availability, data locality, access control [56, 67]. “Data control over cloud services makes it difficult to protect and enforce identity theft and cybercrime security. Sharing resources across multiple domains and failures of data backup also arise some data leakage [57]. In SaaS data flow security is very important especially when it comes to potential intruders over the network security configuration. Due to the fact that at these layers there are present remote access mechanisms an injection there are present also vulnerabilities through which attackers can gain access through the network. At this extent multi-tenancy

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and multitasking is a reason for confidentiality threats [42, 68] therefore it is important to prevent the unauthorized use of data. The integration of the data on the other hand should be done only by an authorized entity with adequate encryption. SaaS providers should offer flexibility to go along with the companies’ policies to avoid intrusion [65]. Security issues in PaaS. Even though the control is given to the client integrator extends security issues such as networking has intrusion should be tackled carefully from the side of the provider. It is crucial for the provider to do ensure the data continues to be inaccessible from eventual applications. Very important to highlight that the vulnerabilities in the cloud computing environment are related also to the machine to machine service-oriented architecture applications [57]) which are considered as increasingly more deployed in the cloud. Security issues in IaaS. Various security issues occur with the deployment models in IaaS. It is evident that private cloud environments deal with fewer security issues compared to public ones. However, since cloud computing offers the feature of virtualization technology, it brings issues of security such as control of data [34]. Because the cloud is a concept coexists with the Internet all the security issues that the Internet faces should be a concern for the cloud environment at some point. When we talk about the infrastructure and service it is important to reconsider that infrastructure does not refer only to the hardware resources, it also refers to the data being transmitted over the media through Internet [65]. Consequently, the data through network or infrastructure can easily be prone to intruders’ activity.

4 Perspective on Available Solutions 4.1 Security Solutions Available Among the biggest issues in cloud computing is the security in-network, for what is considered no complete available security solution [57]. However, there are available options in management that can reduce this level of risk. In the research conducted for the mitigation of security risks [57], there were explained policies, procedures, and eventual tools to deal with the risk of data an application in any of the models of cloud computing. These recommendations were given for cases such as data security and control, network security, data confidentiality and integrity, data and service availability, and access control. For data security and control it is suggested to identify and classify the data accordingly, for the provider to have a knowledge of the types of the various security breach and to be able to prevent, detect, and eventually react properly. For the cases of malicious data in the cloud such as cross-site scripting, insecure configuration, SQL infections it is needed to have regular validity tests [69, 70]. Therefore, for transparent service, it is necessary to have regular control, security, operations, which are the least costly and eventually preventive for bigger issues.

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For the network security to avoid unauthorized modification eventual unauthorized access, it is important to use adequate setup and configuration or firewall as well as auditable access. It is important to test and validate network security with recommended tools as SSL, packet analyses, session management. For data confidentiality and integrity it is crucial to have proper authentication and authorization mechanism for secure key transfer it is recommended RIS and key encryptions [57]. On the other hand, data and service, availability should always have internet bandwidth and connectivity addressed, Furthermore, data replication and backup issues need to be tackled accordingly with the audible proof for data restore procedures and completeness. As for access control the access or changes and services should always be provided in out the table report and properly reviewed and monitored regularly [57]. Cloud computing has an enormous computing power which unfortunately can be misused for cyber-attacks, henceforth, it is important to have a mechanism that will act responsibly for the benefit of the provider and the client. This issue can be challenged using the Service Level Agreement (SLA), which is treated as a contract between the cloud vendor and user [70]. Multitenancy for instance is the future of cloud computing that creates serious data risks in cases, given that the same resources are being provided to different users. In such a case for a secure and reliable multi-tenant model, it is important to use insulation as well as segmentation and restriction [71]. A strong two-factor authentication it is an extra security cheque for the identification of real customer in cases of account hijacking risks. For the companies that deal with highly sensitive data, a great recommendation would be an ideal system that is used to trap the attackers’ activity. This preventive method is a deception trap and if deployed properly, it is a useful tool for warning before a great deal of damage is caused. The challenges in cloud computing security are categorized into three models, in its deployment model, service delivery model end network issues [68, 70]. For this reason, the challenge is in the cloud can be seen in two different perspectives, challenges in architecture and challenges in network infrastructure. Further discussed as presented below are some of the solutions for security challenges contemplating the architecture and network perspective.

4.2 Solutions to Privacy and Security Using Cryptography A continuing research challenge in cloud computing is security and privacypreserving authentication [72, 73]. For companies and enterprises that deal with sensitive information and store information like financial information, health records, and so on, privacy is a fundamental issue. there are many cryptographic tools and schemes available such as anonymous authentication schemes, group signatures, zero-knowledge protocols, that at some point offer identity hiding and authentication. The service providers need to control the authentication process to enter revoke malicious clients [74] by revealing their identity properly. There are a few schemes in cryptographical solutions.

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An example of a share creation scheme was made by XOR visual cryptography [74] using AES (Advanced Encryption Standard) algorithms. Visual cryptography (VC) is a modern cryptographic technique which is applied to the secret image shared securely while maintaining the information with great confidentiality [75]. The generated shares by this scheme and the algorithm are known as encapsulated shares. This technique gives better security and reduces fraud shares. It is widely known to be used to overcome the complex issues of the share of maintenance and identify how to encapsulate these shares in visual cryptography by using encryption for high-security level [74]. Another innovative secure portable document format was proposed by Yang et al. [73] which uses extended visual cryptography, intending to ensure efficient storage and reduce computational time and storage space. The search technique ensures data integrity and tackles significantly the confidentiality aspect. it can hide a large amount of data with minimal afford space and complexity in time. Further, in the visual cryptography method, there’s available another method that has been proposed by Jaya [76], with the idea of encrypting or decrypting the data with last time and applicable in any field of cloud aiming for improved security. The use of this technique could have a great application and improving authentication, access control, encryption of data, and lead so on to a better security parameter.

4.3 Security and Privacy Issues Tackled with Cryptography Some of the cryptographic algorithms used in the security of cloud computing or symmetric key algorithm are symmetric key algorithms as well as a combination of these algorithms. Encryption makes the data more secure in the cloud network, the algorithms as well run on the cloud network [72]. Some of the widely used algorithms in security are AES, MD5, DES, RSA describe below. AES or the Advanced Encryption Standard is the symmetric key encryption standard, that as each of the ciphers with the 128-bit block size, key sizes of 128, 192, and 256 bits, in that order [77]. MD5 commonly used hash function with a 128-bit hash value that process is a variable-length message to a fixed-length output of 128 bits, as input the message is sliding it up into chunks of 512-bit blocks and then it is padded to be a divisible length by 512 [77]. DES (Data Encryption Standard) probably the most commonly used algorithm for encryption. As an algorithm, it operates on plane tax blocks given of size 64 bits and returns ciphertext blocks in the same size. This one as well as the asymmetric key algorithm, which means that the same key is used for encrypting and decrypting data [72]. RSA stands for the algorithm for public-key cryptography, it contains a public key and a private key. The public key is open to everyone and available to be used for message Encryption. However, the decryption of messages with the public key can be done only using the private key. It protected user data include encryption prior

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Table 1 Comparison of mean processing time of the algorithms on the local system as well as on cloud network [77] Input

AES

AES Cloud

BLOWFISH

BF Cloud

RSA

RSA Cloud

MD5

MD5 Cloud

10 kb

11.5

1.5

4

2

238

13 kb

14.7

2

4.7

2

328.2

274.2

1

1

331.5

1

1

39 kb

21

3

8.25

2.75

56 kb

245

3.75

15.7

3

358.5

351.7

1

1

496.2

415.2

1

0.5

Table 2 Speed-up ratio of the algorithms for different input sizes [77] Input (KB)

AES

DES

BLOWFISH

RSA

MD5

10

7.6

3.62

2

0.86

1

13

7.2

4

2.3

0.99

1

39

7

4.8

3

1.01

1

56

6.6

5.43

5.25

1.19

0.5

to storage, user authentication procedures prior to storage or retrieval and building secure channels for data transmission [77]. Following the results of the research conducted by [72], on which the used eclipse runs variable input sizes for the local and Google app engine as well. From the results that they provided as seen in Tables 1 and 2, it was found out that the most timeconsuming encryption algorithm was RSA, where is MD5 is found to be the least time-consuming hashing algorithm. Concerning the speedup ratio, the symmetric encryption algorithm AES was found to be the highest in the scoring speedup ratio. Another important feature that was found during this research was that in MD5 and AES algorithms the speedup ratio was decreasing while increasing in size. For the rest of the algorithm, there is slight to not change. It was recommended from the findings of this article that while looking for a performance of algorithm the best solution would be MD5, AES, DES. Whereas for security, the most efficient one was resulting MD5, AES, with the MD5 among the best for security algorithm and last time consuming [78].

5 Models and Methods of Cost Calculations of Security in Cloud 5.1 Encryption Method of Cost Calculation One of the most basic uses of the cloud is the outsourcing of client data for storage purposes. In this method for the elaboration of cost calculation, in the case of

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encrypted data storage with integrity in the S → L scenario, it was evaluated that the cost of storing a bit would be under 9 picocents/month and network transfer approximately would reach 900 picocents per bit. According to [47] rom the technological cost point of view, it is not effective to store data remotely [47]. However, not all of the benefits of outsourcing can be precisely ‘costified’ and for as long as the clients depend on the benefits like easy access, multi-client settings, pay-per-use, and it is most obvious that the need for outsourcing will keep increasing. As the curve of demand increases, also the need for better security and privacy rises, but how much of these benefits will not be considered a drawback considering the costs of security? Several existing systems encrypt data before storing it on potentially data-curious servers some others perform online real-time integrity verification [66]. In the integrity perspective, the cheapest integrity constructs use of hash-based MACs [33]. In the case of publicly verifiable constructs, crypto-hash chains can amortize their costs over multiple blocks, and in the extreme cases, a single signature could authenticate an entire file system, at the expense of increased I/O overheads for verification [47]. In the study conducted about the costs of security [39], it is found out that for a chain secured by a single hash-chain signed using 1024-bit RSA, it yields an amortized cost of approximately 1 M picocents per 4,096-byte block (30 + picocents/bit) for client read verification, whereas 180 + picocents/bit for write/signatures. Which is considered to be more expensive than MAC-based. In the case of confidentiality, as it can be achieved by encrypting the outsourced content before outsourcing it, consequently it is considered rather hard to be processed by servers. To illustrate the cost case for confidentiality in the study by Chen and Sion [47] it is taken a 32-bit search key example and a 1 TB database. Counting the CPU cycles, for performing a search, to outsource it saves 2500–8000 picocents for access. However, the outsourced searching becomes more expensive for any results upwards of 36 bytes per query according to it. For a secure query processing example, [47] illustrated the case, assuming that the operators would behave linearly and be highly selective by incurring two 32 it transfers. Evaluated, for the network cost, it would reach 900 × 32 × 2 = 57,600 picocents traversing database of 105 and up, which would lead to CPU cost savings per cycle. What in return shows that with very selective queries over large enough databases, outsourcing can break even. Another example of such calculation would be the case of outsourcing applying crypto-hash and linear operation [79]. For a database of 109 tuples of size 64 bits, the hash tree nodes would need to be at least 240 bits. For 3 CPU cycles that are needed per data item, the limit condition results in selectivity s ≤ 0.00037 before outsourcing starts to be more economical. In the case of signature aggregation, it is supposed that the break-even selectivity would be even lower due to the higher computation overheads [47].

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5.2 The Economic Model of Security Threats A very important step towards dealing with the security issues in Cloud Computing security is first to have metrics in order to be able to measure the risks and effects of eventual issues. According to the majority of the existing literature, the dependability of a system can be measured accordingly to the reliability, availability, usability, and security metrics. Such security metrics include security metrics such as the meantime to failure (MTTF), the mean time between failures (MTBF), the meantime to discovery (MTTD), the mean failure cost (MFC), The mean time to exploit (MTTE), and, Average Uptime Availability [80]. The mean failure cost was first introduced as a concept by Ben Alissa [81], to measure the dependability of the system. In one of the studies proposing the economic model of security threats [82], it is proposed the model of cost calculations, defining the security metrics, and proposing three different matrixes as explained below. The Stakes Matrix—By quantifying the MFCi (Mean Failure Cost), as a random variable that represents the cost to stakeholder Hi, in terms of financial loss per unit of operation time (e.g. $/hour) it is assumed that the Mean Failure Cost for stakeholder Hi is defined as:  STi, j × P R j M FCi = 1≤ j≤n

Equation 3 The Stakes Matrix according to Rabai et al. or given as a product, MFC = ST ◦ DP◦ IM◦ PT In this model, there were considered seven generic security requirements according to [80]: • • • • • • •

AVC: Availability of Critical Data. AVA: Availability of Archival Data. INC: Integrity of Critical Data. INA: Integrity of Archival Data. CC: Confidentiality of Classified Data. CP: Confidentiality of Proprietary Data. CB: Confidentiality of Public Data.

To illustrate the example, the model had considered a fictitious running example, having a cloud computing provider (PR), and a sample of three subscribers: • A corporate subscriber (CS), • A governmental subscriber (GS), • An individual subscriber (IS).

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Table 3 Stakes matrix: cost of failing a security requirement stakes [80] Stakeholders

AVC

AVA

INC

INA

CC

CP

CB

PR

500

90

800

150

1500

1200

120

CS

150

40

220

80

250

180

60

GS

60

20

120

50

2500

30

12

IS

0.05

0.015

0.30

0.20

0.30

0.10

0.01

The stakes matrix, therefore, was modeled based in stakes, in terms of thousands of dollars ($K) per hour of operation, as presented in Table 3.

6 Conclusion 6.1 Synopsis Cloud computing is a relatively new and favorable concept that delivers IT services to cloud computing. Some of the major beneficial effects of the cloud computing implementation, that are expected to have a great impact on the overall operational costs are the reduction in IT expenses, business competitiveness and, further investment in the development of the company. Despite the many advantages that cloud computing brings, many enterprises remain reserved toward migration in the cloud, considering the security and privacy problems of the framework as the biggest drawbacks. Considering the nature of cloud computing which means easily accessible files from computers through the internet a highly sensitive data operation carries a lot of risks [83–86]. In this work, it was discussed the problem of security, the need for security, and the approaches needed for the application and data security. Thoroughly, as an objective was to investigate the security solutions in cloud computing and eventually present the methods of calculation for the available costefficient solutions. It addressed cloud security issues and challenges and eventual cost-effective solutions regarding financial perspective. The work itself followed a three-layered research approach. In the first part, it was explained and discussed the overall framework of cloud computing as well as the structure and the mechanism. The major issues regarding the service in cloud computing the architecture and the models of deployment offered are explored in detail. Consequently, the work methodology was separated in two parts of the qualitative and quantitative nature. In this manner, the observing and describing in-depth concepts of services and security in cloud computing as well as cost-effective concept in it was qualitative. Whereas, to obtain empirical evidence for supporting the metascientific findings for the part of the short scientometrics analyses the supporting methodology was of quantitative nature. Text analysis is, on the other hand, made it possible to process the data sources from articles published, papers, books, reports

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on security, manuals, online databases, etc. Moreover, secondary data analyses as a great source of information played a large part in understanding the problem and forming the eventual concepts. A major part of this work was based on secondary data analyses except for the scientometrics parts that had data retrieved from the Scopus database which were later on processed through different tools in the software. The conceptual background in the first section gave an overall picture of the benefits, advantages, and disadvantages of outsourcing. Further in the second section to give a clear perspective of what is the state of the topic, it was conducted a short scientometrics analysis, presenting this way the actual situation. It resulted that even among the top three countries in publishing, it was a decreasing rate of papers, which highlights the need and the cruciality of future work in this topic. Added, in the third section, it was given what methods were involved throughout the work and analysis. The fourth section was separated into two sub-sections giving so the investigation results in the most cost-effective solutions available for the cloud computing security issues such as solutions using secret sharing schemes, cryptography, cryptographic algorithms, public key-based framework, etc. Considered the available solutions, that tackle some of the major issues in security in the cloud, the investigated methods of calculation of costs of security in the cloud were presented in the second part of the fourth section. Described and analyzed there were presented the methods of costs calculations for encryption, the economic model of security threats that proposed different matrixes covering different aspects of security cost-calculations in cloud computing.

6.2 Further Research To conclude, this research has been an opportunity to investigate a wide variety of concepts, models, and technologies in the cloud computing security field. The main objective was to investigate cloud data security concerns while focusing on costeffective solutions and security cost-calculations. Cloud computing security is a field full of ongoing challenges and of paramount importance, henceforth, many research problems remain to be identified and investigated especially when it comes to the monetizing of the certain cost-effective solutions in security. Most of the methods of cost-calculations in cloud security remain oriented in specific issues and cannot be generalized, due to the diverse nature of security and the eventual architecture and models of deployment in different organizations. However, the need for research in the costs of security as separate from cloud computing is quite crucial. The efficiency in the cryptography levels to support outsourcing and eventually secure outsourcing for different range queries is a ground that needs to be undertaken.

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Marketing Communication and Its Role in the Process of Creating Rational Awareness of Generation Z Representatives Katarína Gubíniová, Peter Štarchon, ˇ Lucia Vilˇceková, Gabriela Pajtinková Bartáková, and Jarmila Brtková Abstract It is possible to observe significantly negative responses to the principles of marketing in the form as described so far. Phrases such as “marketing tricks” and “marketing lies” are used more and more frequently in both domestic and foreign professional literature. Consumer market representatives themselves characterize many of today’s marketing activities as “intrusive”, “disturbing”, “misleading” and “deceptive”. Based on such associations, marketing both as a scientific discipline and as a functional area of management often becomes despised. This is also documented by many management practices and experiences. The aim of the paper is to evaluate perception of marketing and marketing communication on the basis of quantitative and qualitative analysis on the representative sample of 1248 Generation Z respondents (i.e. age range 18–29 years) in terms of how positive/negative they perceive the current activities of organizations in marketing communication assessing their impact on creating rational awareness about products.

K. Gubíniová (B) · P. Štarchoˇn · L. Vilˇceková · G. P. Bartáková · J. Brtková Faculty of Management, Comenius University in Bratislava, Bratislava, Slovakia e-mail: [email protected] P. Štarchoˇn e-mail: [email protected] L. Vilˇceková e-mail: [email protected] G. P. Bartáková e-mail: [email protected] J. Brtková e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_6

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1 Introduction The hypercompetitive market, which operates today at the level of many national and global economies, is characterized by the increasing number of unfair, unethical and misleading practices in the efforts of market managers to serve markets [1]. With market development and increasing competition, more and more professionals and even marketing managers themselves, are also aware of this “dark side of marketing”, its disturbing, superfluous and often inadequate approach to servicing customer markets [2]. Misleading, deceptive and unethical approaches to marketing management have become the subject of massive social criticism of marketing [3]. Marketing communication through a combination of communication mix tools used up to now currently plays a significant role in the processes of influencing consumer purchasing decisions [4, 5]. However, it is necessary to emphasize the fact that the role of marketing communication in relation to sustainable strategies is often incompatible with the principles of sustainability. On the one hand, it notably promotes consumption of end customers and participates in creating unsustainable patterns of consumer behaviour, but on the other hand, marketing communication (or its tools) can be crucial in the process of spreading the ideas of sustainability, sustainable lifestyle [6, 7]. Marketing communication constitutes an important element of an organization’s marketing strategy. Marketing communication tools are used by organizations taking into account time and place to achieve different goals [8]: 1. 2. 3. 4. 5. 6. 7.

Build product awareness, Educate or provide information about products, a brand, or an organization, Warn (remind) or reassure customers of a brand, Persuade a potential customer to try a product or brand, Reward customers who bought a product, Improve the brand or organization image, Improve or maintain staff morale.

In spite of the given wide range of objectives that can be achieved applying individual marketing communication tools, the subject of social criticism of marketing is to a large extent marketing communication. Representatives of social criticism of marketing are of the opinion that marketing communication is extensively involved in the following deceptive practices [9, 10]: 1. 2. 3. 4. 5. 6.

Deceiving that stems from a careful selection of words and sentences, while thus declared statements are not true, Significant digital editing of photographs, videos and other visual elements, Deceiving by means of figures, calculations, statistical information and results of various surveys, Sophisticated omission, obscuration or confusion of information, Deceiving through a large amount of (dispersed) information, Activities that give the impression that through them relationships with a customer are created,

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7. 8. 9. 10. 11. 12. 13. 14.

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Displaying false emotions in selling and providing services, Incomplete or misleading framework product comparison, Inadequate requirements for information retrieval and instructions on how to use products, Copying products or brands and sophisticated advertisements using confusion of such products with their originals, Concocted customer characteristics through the brand image, Reverse product placement in films, television broadcasts and on websites, Exaggeration, exaggerated advertising and meaningless contents of messages of marketing communication tools, Obvious and open misleading regarding product attributes, product properties and consequences resulting from product use.

It should be emphasized that the issue of deceptive and misleading practices is not exclusively today’s topic, which can be documented by the work of D. M. Gardner [3], who in 1975 created a comprehensive conceptual approach to misleading practices in the important marketing mix element—marketing communication. The author builds on the behavioral approach, while the criteria for evaluating deceptiveness of marketing communication are still valid today (measurement focused on consumer reaction; allows the advertiser to be creative; allows the advertiser to use truthful product claims; is flexible enough to be adaptable to special situations in the marketplace). The issues of product purchases and trust are presented in the research The Reader’s Digest European Trusted Brands 2018, in which 32% of respondents (or customers) trust organizations with a global reach and only 13% of respondents trust advertising [11]. On the other hand, almost half of the respondents (48%) trust their circle of acquaintances. Similar results are presented in the research Nielsen Global Online Consumer Survey 2017 [12], in which up to 90% of respondents indicated that in purchasing behaviour processes they make decisions based on recommendations of their acquaintances. A relatively high percentage of respondents (70%) also reported that they trust consumer opinions posted online [13–15] (for example in social media and networks, blogs, Internet discussions)—see Fig. 1. In the context of the declining degree of trust in “traditional” channels and marketing communication tools and the increasing degree of trust in customer recommendations and testimonials [16–18], expenditure data on individual forms of advertising thus seem paradoxical.

2 Materials and Methods The aim of the paper is on the representative sample of Generation Z respondents on the basis of quantitative and qualitative analysis to evaluate their perception of marketing and marketing communication in terms of how positive/negative they perceive the current activities of the organizations in marketing communication.

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Fig. 1 Degree of trust in various forms of marketing communication. (Adapted Nielsen Global Online Consumer Survey 2017)

The reliability of the results of the conducted research was at the level of 95% with precision of 3%, while the sample size was represented by 1248 respondents. Quota sampling was used in the selection of respondents, which is a method in which data are collected from a homogeneous group. Quota sampling is a simple but effective way to carry out research in the initial stages. The researcher selects from the population on the basis of quotas, for the purposes of that research they were used gender, education, regional representation and size of the seat. With quota sampling the selection of respondents is not random, which some researchers say may be unreliable. Scientists risk bias. Interviewers may be tempted to interview those individuals on the street who appear to be most useful in completing the form. Quota sampling has its own advantages. Once sampling is complete, the information is easy to perform and decrypt. It also improves the representation of any particular group in the population, thus ensuring that these groups are not over-represented. Based on the chosen sampling method we can say the sample used for this research was representative for the population of the Slovak Republic aged 18–29 years in terms of gender, education, regional representation and size of seat. The questionnaire used in the representative research contained a set of questions comprehensively covering the issue of deceptive practices used in marketing management from the perspective of end customers.

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In order to achieve the objective of the paper, we were evaluating the part in which marketing communication was central. Factor analysis was used to reduce the number of scale variables within the perception of deceptive marketing practices into a smaller number of factors. This technique extracts the maximum common variance from all variables and puts them into a common score. Before conducting the analysis, the data set was tested for outlier and they were removed from the analysis. The data were interval and the analysis is based on linearity assumption and it does not assume the homoscedasticity between the variables. More conditions of the analysis are no multicollinearity and no singularity. For some questions, respondents were given the opportunity to express their subjective attitudes and give examples, and therefore the analysis of those questions will represent the qualitative part of the research. The scientific methods that were used at various stages of completing the paper are as follows: 1.

2.

3.

4.

Abstraction: the thought process in which we did not take into account those features, properties and relationships in marketing communication that are not related to misleading practices, Analysis and synthesis as paired methods in dividing the complex marketing reality into individual parts (elements, characteristics of marketing communication) and subsequent uniting of individual parts selected through an analysis into a whole, Induction and deduction as other paired methods, while induction was used in drawing conclusions and recommendations from empirical material that was at our disposal and deduction was used in inferring from the general to the specific, Comparison of primary representative research with available, relevant secondary research. The results of the research are presented in three main areas of focus:

1. 2. 3.

Perception of contemporary marketing, Attitudes toward sustainable product strategies, Opinions on marketing communication as a basis for creating customer awareness.

3 Results The aim of the paper is on the representative sample of Generation Z respondents on the basis of quantitative and qualitative analysis to evaluate their perception of marketing and marketing communication in terms of how positive/negative they perceive the current activities of the organizations in marketing communication.

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3.1 Perception of Contemporary Marketing Given the existence of several research surveys that dealt with how positive the term marketing is perceived [19], we asked respondents which adjectives they would use to describe contemporary marketing. They had a choice of two positive adjectives (honest; true), six negative adjectives (misleading; deceptive; intrusive; superfluous; disturbing; a term that lost credibility and trustworthiness) and one answer that reflects that they do not have a strong opinion on marketing. Respondents could report several options. 264 respondents (more than 20% of respondents) reported only one option, the others responded in a combination of multiple answers. As can be seen from Fig. 2, the option that marketing (or marketing activities of organizations) is honest nowadays was indicated by 16 respondents, the second positive option, namely that marketing is true, was marked by 12 respondents, which is only marginal results given the total number of 1248 respondents. In terms of negative perception of marketing, the results are significantly more embedded in the minds of respondents. From the point of view of frequency, in the first place respondents marked the option that marketing is misleading (816 responses), in the second place respondents indicated the option that marketing is intrusive (672 responses) and in the following place there was the option to view marketing as the term that lost credibility and trustworthiness (548 responses). In negative perception of marketing, we do not deliberately mention the number of respondents, but the number of responses, since in a very small percentage they were reported separately or respondents reported several negative adjectives associated with perception of contemporary marketing. Less than 10% of respondents (108) do not have a strong opinion on contemporary marketing. Within comparison we will use the secondary research of the portal Statista, one of the largest statistical and market data platforms in the world, with access to over 1.5 million statistics, forecasts, documentations and reports. The platform combines economic data, consumer perspective, opinion polls and demographic trends [20].

Fig. 2 Attitudes towards contemporary marketing (own representation)

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Fig. 3 Consumer attitudes towards advertising in the United States. (Adapted 2017)

With respect to the data in Fig. 3, it is necessary to mention at least size and maturity differences between American and European or Slovak consumer market, but the common characteristics of both markets is the constant trend of increasing expenditure on “traditional” marketing communication tools [21]. It follows from the secondary research in the United States that nearly 60% of respondents indicated advertising as ubiquitous.

3.2 Attitudes Toward Sustainable Product Strategies Another subject of the analysis was a thorough examination of the factors that discourage respondents from purchasing a product. Within these, we offered respondents several options: 1. 2. 3. 4. 5.

So-called abstract factors: distrust; recommendations; lack of information, Factor related to pricing strategy: high prices, Factor related to distribution strategy: poor availability, Factor related to marketing communication strategy: exaggerated advertising, An open answer, in which respondents had the opportunity to indicate a subjective, not mentioned factor which determines their negative attitude to product purchase.

In terms of frequency of occurrence of individual options, we are presenting a frequency table of individual answers (we are talking about answers, not respondents, because they had the opportunity to mark multiple answers) (Table 1). Respondents identified the option “high prices” as the most significant factor that has the potential to discourage them from purchasing a product (this answer occurred 824 times). In terms of microeconomic theory, it is generally true that the price of a product is an important factor on the basis of which a product is evaluated and it is expected to be as low as possible [22–24]. However, there are also exceptions to that relationship where consumers identify the (high) price level of a product with

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Table 1 Frequency table—factors influencing negative attitudes to product purchase (own research) Valid

Frequency

Percentage

Valid percentage

Distrust

644

51.6

51.6

Lack of information

660

52.9

52.9

Poor availability

356

28.5

28.5

High prices

824

66.0

66.0

Recommendations

288

23.1

23.1

Exaggerated advertising

436

34.9

34.9

quality of a product or with its exclusivity (category of luxury products) [25, 26]. The answer “lack of information” ranked second. It is quite surprising how Generation Z representatives view the present time in which there are numerous websites, applications providing comparison services for product parameters, advantageousness of product price, and others in real time via the Internet, mobile phones [27, 28]. The third most frequent answer was the option “distrust”. We included this factor among non-material factors. Trust is at the center of attention in many areas of social life—whether in academic sphere, business or the media [29, 30]. At the most general level, mostly in the post-crisis period the decline of customer trust in organizations can be observed in many industries [31]. The option “recommendations” did not rank among the top three, but it still needs to be addressed—especially in the context of the Nielsen research mentioned in the literature review. Exaggerated advertising in the hierarchy of factors influencing respondents’ attitudes towards product purchase was identified by a total of 436 respondents. This answer needs to be viewed in the context of (unsustainable) marketing communication that uses deceptive practices [32–34] and will be analyzed in the following text. The global Nielsen research (Graph 1) has shown that recommendations ranked top in trust with a significant lead in product purchasing behavior. 288 respondents identified recommendations as a factor that would discourage them from a potential product purchase. To confront this factor, we used the data from the largest online store in the Slovak Republic—Alza.sk and we selected product categories that are likely to be searched for by Generation Z. These product categories are as follows: 1.

2.

Mobile Phones—smartphones. The best-selling product is a mobile phone Xiaomi Redmi Note 7 LTE 64 GB blue with more than 10,000 + purchases. There are 155 verbal reviews of this product. We assume that in the competitive fight Alza.sk does not disclose the total number of sold pieces of a product, taking into account the marketability at the level of 10 thousand, there is the review ratio at the level of 1.55 customers, i.e. a negligible percentage of customers shared their reviews. Laptops—for general use. The best-selling product is Dell Inspiron 15,3000 (3583) black with 500 + units sold. There is one verbal review of this product and thus the same applies as in the previous product category.

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Headphones. The best-selling product is Xiaomi Mi True Wireless Earbuds Basic with more than 5000 units sold and 28 verbal reviews. Video game consoles. The best-selling product is a video game console PlayStation 4 Pro 1 TB + FIFA 20 with more than 2000 units sold and a relatively low number of verbal reviews (160, i.e. less than 8% of customers).

The indicated numbers of customers [35] who in real space of the largest online store were willing to share their (positive) experiences with purchased products are very low, so we can reasonably assume that respondents for that reason do not consider other customers’ recommendations as a meaningful factor.

3.3 Opinion on Marketing Communication as a Basis for Creating Customer Awareness In the quantitative analysis of evaluating attitudes to contemporary marketing it can be concluded that respondents perceive it relatively negatively. The analysis of evaluating respondents’ attitudes to advertising (Fig. 4) is a natural follow-up to examining associations with marketing as such. We gave respondents a choice of three categories: 1. 2. 3.

Positive associations linked to advertising: creative; humorous; imaginative; eye-catching, Negative associations linked to advertising: boring; annoying; full of clichés; unrealistic, Another option, with enough space for giving an answer.

The results achieved correspond to the quantitative analysis of evaluating marketing as such. Fig. 4 Attitudes towards contemporary marketing communication (own representation)

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Among 1248 respondents we noticed 128 responses to the statement that contemporary advertising has a positive rate of creativity. We noticed 88 responses to the statement that advertising is humorous, somewhat less (80 responses) to the statement that advertising is imaginative. The option “advertising is eye-catching” ranked second in positive associations. A significantly higher frequency of occurrence was seen in only negative associations with which respondents associate contemporary advertising. The answer that advertising is annoying ranked first (352 responses), then the second-ranked was advertising full of clichés (276 responses), and the third-ranked was unrealistic advertising (204 responses). At first glance the values may appear to be low compared to the sample size, but this is due to the fact that we dealt either with only positive or with only negative associations with advertising. We received several hundred responses in which respondents indicated a combination of positive and negative associations, saying that in an open option it is quite difficult for them to report only positive or only negative associations, since there are both positive and negative examples in advertising practice (see, for example, various competitions in which creative rendering of advertising is evaluated, or prejudices that have been present in advertising for decades). More than 100 respondents (less than 9% of respondents) took the opportunity to express their own perception of advertising. The most frequent responses among these were: 1. 2. 3. 4. 5. 6.

Misleading, Frustrating, Naive, Without an idea, Deceptive, Repetitive.

We can say that almost all the answers were negative, only 12 were positive (but in the sense that there are also examples of flawed advertising practice). When examining attitudes to deceptive practices currently applied, from the point of view of respondents, we provide the percentage of respondents who indicated that they agree with the (deceptive) marketing practice or have been confronted with it. Table 2 provides a list of the given practices with respondents’ attitudes expressed as an absolute number and percentage (there was the possibility to mark more answers). Based on the results of the quantitative analysis of deceptive practices we identified that from the perspective of respondents the most frequent are the following (deceptive practices): deceiving that stems from a careful selection of words and sentences, while thus declared statements are not true (63% of respondents); significant digital editing of photographs, videos and other visual elements (59% of respondents), and exaggeration, exaggerated advertising and meaningless contents of messages of marketing communication tools (57% of respondents). Based on the percentage differences among these three practices, it can be concluded that the differences among them are not very significant. The gap between respondents’ perception of

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Table 2 Perception of deceptive practices used in marketing communication from the perspective of respondents (own research) Deceptive practice

Absolute number Percentage (%) Ranking

Deceiving that stems from a careful selection of 786 words and sentences, while thus declared statements are not true

63

1.

Significant digital editing of photographs, videos and other visual elements

736

59

2.

Deceiving by means of figures, calculations, statistical information and results of various surveys

524

42

4.

Sophisticated omission, obscuration or confusion of information

424

34

6.

Displaying false emotions in selling and providing services

449

36

5.

Incomplete or misleading framework product comparison

412

33

7.

Inadequate requirements for information 137 retrieval and instructions on how to use products

11 11.

Copying products or brands and sophisticated 312 advertisements using confusion of such products with their originals

25

8.

Concocted customer characteristics through the brand image

237

19

9.

Reverse product placement in films, television broadcasts and on websites

449

36

5.

Exaggeration, exaggerated advertising and meaningless contents of messages of marketing communication tools

711

57

3.

Obvious and open misleading regarding product 187 attributes, product properties and consequences resulting from product use

15 10.

practices in the first place and twelfth place is 52 percentage points, which is quite a significant difference (the practice “inadequate requirements for information retrieval and instructions on how to use products” was ranked last—it was marked by 11% of respondents) (Table 3). Based on the results of the factors analysis it is clear that we can identify two main factors of deceptive practices used in marketing communication. The first factor is product deception. Respondents feel deceived by significant digital editing of photographs, videos, and other visual elements. They complain about incomplete or misleading framework, product comparison and find the requirements for information retrieval and instructions on how to use products incomplete. Copying products or brands and sophisticated advertisements using confusion of such products with their originals is also an important issue as well as reverse

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Table 3 Perception of deceptive practices used in marketing communication from the perspective of respondents (own research) Rotated component matrix

Factor 1

Factor 2

Deceiving that stems from a careful selection of words and sentences, 0.418 while thus declared statements are not true Significant digital editing of photographs, videos and other visual elements

0.554

Deceiving by means of figures, calculations, statistical information and results of various surveys

0.502

Sophisticated omission, obscuration or confusion of information

0.748

Displaying false emotions in selling and providing services

0.641

0.496

Incomplete or misleading framework product comparison

0.566

Inadequate requirements for information retrieval and instructions on how to use products

0.639

Copying products or brands and sophisticated advertisements using confusion of such products with their originals

0.742

Concocted customer characteristics through the brand image

0.419

Reverse product placement in films, television broadcasts and on websites Exaggeration, exaggerated advertising and meaningless contents of messages of marketing communication tools Obvious and open misleading regarding product attributes, product properties and consequences resulting from product use

0.659 0.711 0.558

product placement in films, television broadcasts and on websites. The last characteristic within this factor is obvious and open misleading regarding product attributes, product properties and consequences resulting from product use. The second factor of deceptive practices is communication. It covers deceiving that stems from a careful selection of words and sentences, while thus declared statements are not true as well as significant digital editing of photographs, videos and other visual elements. Respondents also stated the feel deceived by means of figures, calculations, statistical information and the results of various surveys or sophisticated omission, obscuration, or confusion of information. Furthermore, they complained about displaying false emotions in selling and providing services. An important factor also is concocted customer characteristics through the brand image and exaggeration, exaggerated advertising, and meaningless contents of messages of marketing communication tools.

4 Discussion and Conclusions In the concept of sustainable marketing management, marketing communication is just as an important element of the marketing mix as in the traditional concept of

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marketing management. Without effective marketing communication, it is difficult to build awareness of sustainable solutions that organizations offer to the customers [36, 37]. Effective marketing communication establishes long-term relationships with customers (which are further strengthened in different stages—for example in the stage of product use, in the stage after the product life cycle). The challenge for marketing managers who manage an organization’s communication strategy in accordance with the concept of sustainable marketing management is to create marketing communication campaigns that respect characteristics of customers and use the power of individual marketing communication tools so that they would not be associated with negative social and environmental aspects of communication [38]. In view of our suggestions for the above results, the following recommendations can be formulated. Regarding the question in which we examined the strength of associations (positive versus negative) towards contemporary marketing, in the context of modern marketing management, there is a need for a qualitative shift towards these areas and activities. Perception of contemporary marketing. Marketing as a concept has often been identified with sales [39], what has been at least as many times refused as such a view of marketing is too limited and narrowed. Organizations need to adopt a much broader perspective aimed at improving life quality of their customers. Marketing managers need to develop new marketing models that focus on addressing long-term issues that customers are truly interested in. To eliminate emerging pressures and resistance to products that are harmful to individual customers or the company itself, organizations must even through their marketing activities take responsibility for educating their customers in ways that will have a positive impact on the company. In customer behaviour there is the main focus on customer education (emphasizing sustainability in their purchasing decisions) and sustainable consumption. Regaining customer trust is an important issue. A new paradigm in marketing should reconsider the attitude towards customers. Thus, instead of producing products and services that customers require to meet their needs, marketing managers should actively support their customers throughout the organization. Nowadays there are several driving forces in the marketspace that determine a customer’s position in the market, such as: Internet enabling too, or particularly dissatisfied customers to communicate with other customers; decreasing influence of (traditional) media; a large number of nearly identical products and services; stricter consumer protection legislation [40–42]. More and more customers are aware of this “power and authority” and use it actively. The answer to this situation must be at the organizational level a choice between traditional marketing (the so-called offensive marketing model that in the world characterizes marketing from 1950 to 2000 [43]) or modern, trust-based marketing, in which organizations cooperate with a customer and thus contribute to mutual satisfaction. Despite an increasing number of markets driving forces in the world and the fact that the market environment has become hypercompetitive [44–46], marketing is overlooked and “sidelined” in many cases. One of the causes can be the fact that “side effects” of marketing have prevailed over the determined main effects. Can this situation be improved? Several variables in the customer—organization— society relationship need to be rethought in order to compensate. Marketing used

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to be declared a representative of customers in an organization [47, 48], however, in fact it represented (also using unfair practices in many cases) an organization of customers by means of endless innovations, aggressive marketing communication, etc. Marketing does not work in its traditional concepts anymore, and therefore it is necessary to identify with a new view of it. According to Kotler [49], the benefits of marketing include the facts that it has improved the quality of life, played an important role in creating markets and products, increasing comfort and enriching life in general. However, it is questionable where the boundary is between a healthy, rational, responsible, and sustainable approach to marketing and a moment when this approach becomes harmful. Product strategy. In a product strategy, sustainability building concepts include [50–52]: sustainable aspects from sourcing necessary for manufacturing a product to beyond the end of the product life cycle (from cradle to cradle), product life cycle assessment, certification of sustainable products, recycling and product reusability, sustainable product design, product development for the lowest income groups. Redefinition of product strategy is needed. It is enviable for companies to emphasize the way in which products are produced, distributed and sold. An innovation strategy should focus on responsible and ethical production methods (e.g. child labor ban). Based on the research results companies should promote benefits of using a product instead of possessing a product. Communication strategy. If marketing communication is to be prepared with a sense of responsibility for a customer, it should use the following concepts: publishing sustainability reports, labelling and certifying sustainable products, marketing communication that focuses on rejecting and reducing unsustainable principles and vice versa that emphasizes recycling, reusing, repairability and implementing the principles of demarketing [53, 54]. Marketing communication is at the center of attention of social critics of marketing [55–57], because in many cases it remarkably promotes consumption of end customers and contributes to the development of unsustainable patterns of consumer behaviour. That is why it is quite complicated to manage marketing communication of (sustainable) products. Advertising as one of the most frequent tools of marketing communication has attracted a great deal of criticism caused by the social and environmental impacts of advertising. Many social critics ask (often reasonably) whether advertising faithfully reflects experiences that a customer might have or has. A wide range of marketing communication activities raises questions about how individual tools are used in terms of efficiency and effectiveness (resources invested in tools versus their return in various forms, such as a completed transaction, memorizing message content)—it particularly refers to direct marketing tools, sales support and (television, print) advertising. The social consequences of marketing communication are constantly in the focus of many subjects—both critics and the academic community [58, 59]. Some argue that tools of marketing communication (or advertising) are ubiquitous and so disturbing that they are capable of significantly influencing and shaping the values and desires of society, and thereby co-create materialistic, cynical, egoistic and shallow people. Ultimately, such individuals will become a homogeneous global culture, represented by customers with unrealistic stereotypes [60, 61]. Another, relatively

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frequent argument is that while marketing as such seeks to ensure and create customer satisfaction, marketing communication often unintentionally creates considerable customer dissatisfaction [62]. The content of messages of various marketing communication tools directed at certain segments or target groups is aimed at evoking a desire for a certain product. However, many individuals who share the same desire, but who, for various reasons (predominantly objective), cannot afford the product or satisfy the desire, will also be affected by these tools. The effect of “dissatisfaction” often remains ignored, because such a part of the target audience is not taken into account in the “original” target group and therefore their response to the content of the message (passive or negative) is not considered or evaluated. It is also necessary to draw attention to other opinions that advocate the content of marketing communication messages and statements in such a way that they “only” reflect the existing values of society without affecting and creating them. Supporters of this approach further argue, that although marketing communication tools are able to influence customers in the sense that based on them, customers choose from a large number of brands and product categories, they are not able to generate demand on the end customer side. Based on the results of the primary research, we identified a need that for implementing sustainable marketing management it is necessary to rethink many existing marketing activities related to customer needs, individual elements of the marketing mix, and responsibility at the organizational level. A very significant change is extending the time for return on investments related to building sustainable marketing management, because this concept emphasizes the long-term aspect or continuity in the long term. Another examples of changes in marketing activities are shown in Table 4. The table above shows that the changes towards sustainable marketing management are mainly related to traditional marketing activities in strategies of the marketing mix elements, but also to customer behaviour (only strategies of product and communication strategy are formulated, as these were subject to the examination for the purposes of the paper). Changes within the academic sphere need to be made as well. Marketing has an unquestionable role and responsibility in building its position in the organization, but also in society (in the sociological sense). However, there is a demand for a greater degree of relevance of marketing as an academic scientific discipline, as well as addressing the challenges of marketing research (rigidity versus practical relevance of marketing research). In marketing, it is necessary to choose the right combination of learning as art versus as science, as the creative dimension of marketing is nowadays still at the forefront.

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Table 4 Rethinking of traditional marketing activities towards sustainable activities (own research) Change in a marketing activity

Description and examples of change

Redefinition of product strategy

Emphasizing the way in which products are produced, distributed and sold. An innovation strategy should focus on responsible and ethical production methods (e.g. child labor ban)

Willingness to change the market

Focus on new types of markets in which material flows become cyclical due to recycling and reusability Take into account alternative production and consumption patterns (e.g. farm shops)

Emphasizing benefits of using a product (instead of possessing a product)

Possession of a tangible product is replaced by consuming a service

Marketing communication which aim is to inform (instead of emphasizing and persuading)

Marketing communication should educate customers and explain to them what makes a product sustainable Declaring sustainability using standards and labels developed by independent entities

Focusing also outside the current customer needs (view of the future)

Production and consumption affect not only current but also potential customers and future generations of customers

Willingness to manage changes in demand (downwards)

Applying demarketing (motivate to responsible consumption)

Importance placed on costs (instead of final product price)

Competition based on total production costs, costs resulting from possession, use and depreciation of a product Determining the amount of costs taking into account the environmental and social costs of marketing activities

Demanding a higher level of responsibility, education

Prosperity of customers and society Take responsibility and educate customers, employees, suppliers towards their sustainable behaviour

Acknowledgments Funding This research was funded by the Scientific Grant Agency of the Ministry of Education, Science, Research, and Sport of the Slovak Republic, grant registration number 1/0737/20—Consumer Literacy and Intergenerational Changes in Consumer Preferences when Purchasing Slovak Products.

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How is Data Visualization Shaping Our Life? The Application of Analytics from Google Trends During the Epidemic of COVID-19 Yuanxin Li

Abstract In this article, we have discussed about how has the diverse information acquisition methods greatly enriched user behavior habits, and give a case study of the application of the methods of big data in China, to fight against the epidemic. During the epidemic, users tended to search actively from passive information viewing. The real demands of people’s livelihood behind searching numbers also make search and public opinion show a kind of “resonance” phenomenon. This article uses data from Google Trends to apply for analysis of Big Data Visualization, and analyzes issues worthy of research such as guiding epidemic control and people’s livelihood. The strategic significance of Big Data technology is not to grasp huge data information, but to professionally process these meaningful data. This article establishes hypotheses, studies how to achieve “value-added” data in Big Data search, and guides government decision-making through data visualization. Keywords COVID-19 · Data visualization · GDPR · Google related search · Health code

1 Introduction The outbreak of COVID-19 pneumonia virus in China from the end of 2019, then raged around the world. From the perspective of the Information Technology, the data of searching volume in the middle of an outbreak is very valuable. The data has been accompanied by the development and changes of human society and playing more and more significant role in modern era. It has carried the efforts and tremendous progress made by mankind to understand the world based on data and information systems. However, it was only since the emergence of modern information technology, represented by computers that provided automatic methods and means for data processing, and the ability of humans to master and process data achieved a qualitative leap. Information technology and its application in all aspects of economic and Y. Li (B) Comenius University of Bratislava, Odbojárov 10, Bratislava, Slovakia © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_7

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social development (i.e., informatization), promote data (information), has become another important strategic resource after material and energy. The “Big data” as a concept and trend of thought originated in the field of computing, and then gradually extended to the fields of science and business. Most scholars believe that the concept of “big data” first appeared publicly in 1998, when the chief scientist of the US high-performance computing company SGI, John Mashey, pointed out in an international conference report: “With growth, there will be four problems that are difficult to understand, difficult to obtain, difficult to handle, and difficult to organize.” The challenge is described as “Big Data”, which will trigger thinking in the field of computing. After years of development and precipitation, people have formed a basic consensus on big data: the phenomenon of big data stems from the ubiquitous application of information technology brought by the Internet and its extensions and the continuous low cost of information technology. Big data generally refers to a huge collection of data that cannot be acquired, managed, and processed with traditional information technology and software and hardware tools within a tolerable time. Li et al. [1] have conducted a retrospective analysis of the possibility of predicting the COVID-19 outbreak, and thus have found that internet searches and social media data had high correlation with daily incidences, with the maximum r > 0.89 in all correlations. It has the characteristics of massiveness, diversity, timeliness, and variability. Scalable computing architecture to support its storage, processing and analysis. At present, in the practice of big data applications, there are many applications of descriptive and predictive analysis, and fewer applications of deeper analysis such as decision-making guidance. People’s decision-making process usually includes three basic steps: understanding the current situation, predicting the future, and choosing strategies. These steps also correspond to the three different types of big data analysis applications mentioned above, which indicate different division of labor and collaboration between humans and computers in the decision-making process. For instance, in the descriptive analysis, the computer is only responsible for presenting information and knowledge related to the current situation to human experts, while the judgment of the future situation and the selection of the optimal strategy are still done by human experts. The deeper the application level, the more and more complex tasks the computer undertakes, the greater the efficiency improvement, and the greater the value. However, with the deepening of research and application, people have gradually realized that the deep neural networks that shined in big data analysis applications in the early stage still have problems such as imperfect basic theory, unexplainable models, and poor robustness. Therefore, although the decision-making guidance application with the deepest application level has achieved good application effects in non-critical fields such as human–machine games, it has higher application value in autonomous driving, government decision-making, military command, and medical health. The fields closely related to human life, property, development and safety still face a series of major fundamental theoretical and core technical challenges to be solved if they are to be effectively applied. Before this, people have not dared and cannot let go of more tasks to the computer big data analysis system to complete. This also

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means that although there have been many successful big data application cases, they are still far from our expectations, and big data applications are still in their infancy. In the future, with the expansion of application fields, the improvement of technology, the improvement of data sharing and open mechanisms, and the maturity of the industrial ecology, predictive and guiding applications with greater potential value will be the focus of development. The new coronavirus pneumonia epidemic has escalating all over the world since the end of 2019, the scientific control of the epidemic has become a top issue for all humankind. Lin et al. [2] have argued the outbreak in Wuhan, and the control measures impleted by the Chinese government, such as the city lockdown to mitigate the impact of the epidemic. The first positive case with the coronavirus was reported in Wuhan, China at the beginning of December 2019, In fact, for example China has established a complete epidemic monitoring and control system since the “SARS” in 2003. The epidemic notifications that people see every day are based on strict mechanisms that are reported, collected, and summarized at various levels. Also the virus has been later named as “SARS-CoV-2”, the disease it causes has been named in abbreviation “COVID-19”. The epidemic has been developing even until February, when the government has decided to lockdown the city Wuhan, just the day closed to the traditional Spring festival, when the Chinese usually get reunion with their family. Local governments also have the most and most important Big Data. At the same time, people use mobile phones daily to apply various softwares in the field of communication, social networking, search, maps, short videos, and e-commerce to generate a large amount of behavioral data. Operators and various apps have users’ ID information, which can associate activities with their identities. Raghav et al. [3] have explained the major prerequisites and challenges that should be addressed by the recent exploration and visualization systems. Also analyzed the different techniques and tools currently used for the visualization of large sets of data and their capabilities to support massive volume of data from variety of data sources. Although it is a complex task for the companies to explore and visualize very large datasets. Every company should follow some protocol to have accurate insight from analysis of large volume of data. This strategy helps organizations to enhance their process and to find the new product and service opportunities that they may have otherwise missed [4, 5]. McAfee and Brynjolfsson [6] illustrated the connection between big data and management. They concluded that, because of big data, managers can measure, and hence know, radically more about their businesses, and directly translate that knowledge into improved decision making and performance. Gorodov and Gubarev [7] have mentioned in their research, that there are some specific problems in Big Data visualization, so there are definitions for these problems and a set of approaches to avoid them. Also, they gave a review of existing methods for data visualization in application to Big Data and taking into account the described problems. Summarizing the result, they have provided a classification of visualization methods in application to Big Data. Gandomi and Haider [8] have analyzed the case for new statistical

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techniques for big data, and highlighted the expected future developments in big data analytics. Lidong et al. [9] emphasized, that Big Data analytics and visualization should be integrated seamlessly so that they work best in Big Data applications. Rajeev et al. [10] have also identified the challenges and opportunities in big data visualization and review some current approaches and visualization tools. The contradiction between privacy, security and shared use is particularly prominent. On the one hand, the need for data sharing and openness is very urgent. The important progress made in artificial intelligence applications in recent years mainly stems from the analysis and mining of massive, high-quality data resources [11]. For a single organization, it is often difficult to gather enough high-quality data by relying on its own accumulation. In addition, the power of big data applications, in many cases, stems from the comprehensive integration and in-depth analysis of multi-source data, so as to obtain a comprehensive view of things from different angles. The data of a single system or organization often only contains one-sided and partial information of a thing. Therefore, only through sharing and openness and cross-domain circulation of data can a complete data set of information be established. However, on the other hand, the disorderly circulation and sharing of data may lead to major risks in privacy protection and data security, which must be regulated and restricted. In view of the frequent privacy and security issues caused by the improper use of personal data by Internet companies, the EU has formulated the “most stringent” data security management regulation in history, the General Data Protection Regulation (General Data Protection Regulation, GDPR), and officially came into effect on May 25, 2018. Li and Saxunová [12, 13] have argued that, after the “Regulations” came into effect, Internet companies such as Facebook and Google were accused of forcing users to agree to share personal data and faced huge fines and were pushed to the forefront of public opinion. On January 1, 2020, the “California Consumer Privacy Act” (CCPA), known as the “most stringent and comprehensive personal privacy protection act” in the United States, will come into effect. CCPA stipulates new consumer rights aimed at strengthening consumer privacy and data security protection, involving the access, deletion and sharing of personal information collected by enterprises. Enterprises have the responsibility to protect personal information. Consumers control and own their personal information. Information, this is currently the most typical state privacy legislation in the United States, which has raised the standards of privacy protection in the United States. In this case, the typical Internet business model that used Internet platforms to collect user data centrally to achieve platform-based precision marketing will face major challenges [14, 15].

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2 Data Visualization and the COVID-19 Epidemic 2.1 What Can Big Data Do for Epidemic Control? During the epidemic situation, Google search also shows a trend of keyword search related to the epidemic situation. As of March 2020, the ten most popular keywords of Google currently are “Coronavirus”, “Lysol”, “Perishable Food (Perishable foods)”, “Social distancing”, “Trip cancellation”, “Solano County”, “Carnivorous”, “Dog coronavirus”, “Beards” and “Movie ‘Infectious Disease ‘". To some extend, behind the user’s search behavior, search data corroborates the value of public opinion and insights into changes in public opinion. How to use advanced tools and methods to help fight the epidemic is one of the key issues in advancing epidemic control. Zhou et al. [16] have analyzed method of Geographic Information Systems (GIS), together with big data provides geospatial information to fight COVID-19. As a modern method, Big Data has the advantages of multisource, massive, wide openness, and strong integration. Making full use of Big Data technology can effectively strengthen epidemic control efforts. Hereby in Table 1 there are some actual applications of users’ data collected by websites and mobile applications listed, which gives a perspective of how Big Data is shaping our daily life. Listed by author Big Data has the advantages of multi-source and wide openness, thus could play a key role in dynamic monitoring through data mining. On the one hand, real-time broadcast of epidemic data can be realized. For example, platforms such as “Doctor Lilac” launch “real-time dynamics of pneumonia epidemics” based on publicly available epidemic data. On the other hand, it can accurately grasp the traffic control and other conditions adopted in various regions since the spread of the epidemic. For example, apps such as Google Map can realize real-time broadcast of road conditions and help the public plan their trips.

2.2 Big Data of Search Volume Could Guide the Economy and People’s Livelihood With the help of Big Data technology can accurately track the source of virus infection. Figure 1 illustrates the typical factors of Big Data. The more the large-scale population movement and the high incidence of infections, the more it is necessary to accurately track pneumonia diagnosed and suspected patient groups as the main source of infection. Only by quickly and accurately grasping the flow direction of patients can we determine the infected area and scope as soon as possible, and provide important clues and effective information for the next step of epidemic prevention and control. Through Big Data technology, the relevant information of all infection

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Table 1 Examples of applications of data collected by users during COVID-19 No

Applications

1

Follow up cases or suspected cases and set Screening of people who use real-name up checklists applications that are commonly used to obtain user positioning and action trajectory will allow anyone who comes from, or is exposed to, or through an infected area, to appear in a public place at the same time as a confirmed case, or Contact (indirect or direct contact) is included in the corresponding screening list; analyze the comments and information posted online platforms to investigate as far as possible whether there is potential for disease or virus carry. Simultaneously update in time (When apply tracking methods, care about the current policies of protect self data information.)

Details

2

Provide health education and accurate management for high-risk groups

Members on the list can be targeted to push the relevant knowledge about new coronary pneumonia protection through the online platform, improve their awareness of the disease, and personal protection knowledge, so as to enhance the sense of responsibility to protect themselves and other close contacts around them. Protective skills. The grassroots staff at the place where the person on the list implements grid management can actively contact the person on the list one by one by means of positioning, communication number, etc., carry out short-term monitoring, follow-up measurement of body temperature, and advise on the specific conditions of the list, Urge self-isolation or medical observation

3

Establish and improve a public infectious disease network investigation platform

For those who are accurately monitored, if abnormal conditions are found, the grass-roots staff responsible for the inspection should report in a timely manner and take corresponding prevention and control measures

sources can be effectively integrated, and the basic flow of the disease source can be grasped based on comprehensive statistical analysis, which is conducive to identifying key prevention and control areas and achieving grid-based management and prevention and control. Therefore, Big Data technology should be fully utilized in epidemic prevention and control. By using Big Data can also make basic predictions of the epidemic situation. The epidemic situation has become the focus of attention and discussion from all walks of life. The use of Big Data technology can provide technical support to a certain extent

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Fig. 1 The factors of big data Person

Model Technique

Data

against the epidemic. Through data mining, the epidemic law hidden behind the data can be effectively analyzed, and then the development of the epidemic situation can be analyzed and grasped to provide a scientific reference for the formulation and implementation of relevant decisions.

2.3 Case Study:Multiple Applications of Epidemic Control Supported by Big Data in China 1. Queries of close contact supported by big data • People who are in close contact with patients who have epidemic infectious diseases have a higher risk of being infected themselves and may further infect others. Therefore, tracking and observing these close contacts will help these high-risk groups receive care and treatment in the first time, and prevent the virus from spreading further, which is also the key to epidemic control. • From the data essence, contact identification is essentially looking for people who overlap with the infected person in time and space. In the current information society, a big data integration platform can be established through base station data (operators), payment data (UnionPay & third-party payment institutions), travel data (railroads & airplanes & accommodation), urban public security video surveillance systems, etc. Fusion and deep mining further realize personnel tracking. • Some countries use smart city platform related data, combined with mobile phone signaling data, to help track and confirm the patient’s movement trajectory and population contact history, promote the establishment of individual relationship maps, help accurately locate the spread of the epidemic, locate the source of infection and close contact with people, Provide valuable information for epidemic prevention and control.

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Fig. 2 The application of the “Close Contact Measurer” mobile APP

• The E-Government Office of the General Office of the State Council, the National Health Commission and China Electric Power Technology Co., Ltd. jointly developed the “Close Contact Measurer” APP, which provides accurate data through in-depth sharing of authoritative data resources from the Health Commission, the Ministry of Transport, the Railway Corporation, and the Civil Aviation Administration of China. • By scanning the QR code to download the close contact inquiry software to the mobile phone, the general public can inquire whether they are close contacts of a new coronary pneumonia patient by entering their personal information as Fig. 2 illustrates. • As of February 20, the cumulative number of inquiries has exceeded 150 million, and the self-discovered close contacts of patients with new coronary pneumonia have exceeded 90,000. • The official railway tickets booking software–12,306 takes advantage of the big data of real-name ticket sales to timely cooperate with local governments and prevention and control agencies at all levels to provide hundreds of batches of information on close contacts of confirmed patients on vehicles. If there are confirmed or suspected passengers on the train, passenger-related information will be retrieved, including train numbers, carriages, etc., and then provided to the relevant epidemic prevention department for follow-up processing. • Through trajectory tracking, telecom operators in many places identify people who have been in the range of confirmed patients and help accurately locate close contacts. • A number of Internet platform companies have produced the “Confirmed Patients Same Trip Query Tool". Users can enter information such as date, train number, and region to confirm whether they have traveled with a confirmed patient who has been disclosed. 2. Decision-making on epidemic prevention and control assisted by big data

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• Based on historical and existing population movements, data on the occurrence of infected people and behavioral trajectories, some governments and institutions have established epidemic spread and spread models to predict the development trend and controlled probability of the epidemic in real time, and promptly promote early warning information to provide relevant decision-making reference. • Beijing’s decision to completely stop inter-provincial highway traffic in February is based on big data analysis. • The Guizhou Provincial Department of Science and Technology has established an epidemic research and judgment expert group, which organizes experts in epidemiological statistics, pathogenic organisms, and data analysis every day to concentrate research. As of February 20, the expert group has submitted 38 analysis and judgment reports to the provincial government leaders in charge. • At the beginning, Guizhou showed a “little pink” of less than 100 confirmed cases on the epidemic map. However, the expert group gave a “divine prediction” five days in advance: On February 9, there will be more than 100 confirmed cases in Guizhou. Sure enough, the “little pink” changed color after 5 days. • "God judgment” is based on the prediction of the epidemic situation and the study of the transmission route. The expert group also put forward targeted prevention and control suggestions, such as comprehensive investigation of key populations, and strict prevention of communities and towns. 3. Promote the construction of prevention and control system with big data. • On February 8, the Haidian District Government’s Urban Brain Epidemic Prevention and Control Platform was officially launched for trial operation at the Haidian District Urban Service Management Command Center. Relevant government units in Haidian District only need to log in to the “Urban Brain Epidemic Prevention and Control Platform” to be the source of the returnee Information such as whether it has passed through the epidemic area, whether it has passed the vehicle with the confirmed case, and the length of stay can be displayed on the big screen in real time. • The platform consists of four parts: an information management system for epidemic prevention and control personnel, an epidemic big data analysis system, an epidemic early warning system, and a community prevention and control early warning system, which integrates personalized data analysis, analysis of returning populations, population investigation analysis, and key population dynamic monitoring With important functions such as, tracking, and early warning services, a three-dimensional epidemic tracking and prevention system has been constructed that integrates industry management departments at all levels, territorial management departments, social units, and the public, which can effectively help relevant units to prevent and control the epidemic. • On February 3, the epidemic prevention and control combat system in Lucheng District, Wenzhou City was launched. On the basis of physical geographic information, the system enters relevant epidemic data information according to the

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actual situation, and uses big data analysis to support the service epidemic situation study and judgment, which fully reflects the current situation of the epidemic situation in Lucheng, grid management, bayonet duty, and crowded places, Distribution of medical resources, construction sites, and property communities. • On the basis of protecting personal privacy, the system can also track the spatial distribution of persons diagnosed, suspected, observing, home isolation, close contact, reflux, etc., as well as information on the basic situation of individuals, establish a relationship map, and build personnel The network system accurately locates communities, communities, and buildings, and accurately monitors related persons responsible for epidemic prevention. • The system also grasps the medical resources of the whole district, collects service information such as medical staff, and all types of on-site control personnel information for key checkpoints and property communities are also shown as images, further improving the efficiency of resource allocation. 4. Use big data to help restore production and life. • Epidemic prevention health code (referred to as “health code”) is a new type of application based on technologies such as the Internet and big data that emerged in the context of the prevention and control of the new crown epidemic. The health code includes multiple functions such as data statistical analysis and personnel flow monitoring, and has played a huge role in balancing the relationship between epidemic prevention and control and the resumption of work. • Since the launch of “Yuhang Green Code” on February 7 in Hangzhou City, more than 200 cities have launched “Health Code” in just two weeks. Under the guidance of the Electronic Government Affairs Office of the General Office of the State Council, based on the national integrated government service platform, the national version of the health code has also been announced. • In general, the “health code” is a vivid application of big data thinking and big data technology in the field of emergency management. It is an original and innovative new digital governance mechanism, which has an important role in promoting the modernization of the national governance system and governance capabilities effectively. Figure 3 shows the exact implication when different color of the code shown in your mobile. • According to the basic needs of epidemic prevention and control, the three biggest telecommunications companies of China provide users with the service of “visiting places within 14 days” based on the analysis of telecommunications big data with user authorization. • This service can help relevant departments improve the efficiency of the itinerary inspections of migrants, conduct inspections on key groups, and implement precise prevention and control, especially helping to resume work and production under the current situation. • With the help of inquiry text messages, mobile phone users can prove their itinerary to the employer, community management and other departments when they are asked about the itinerary.

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Fig. 3 The application of the “Health code” in China

• Shanghai Big Data Center, Shanghai Small and Medium-sized Enterprise Policy Financing Guarantee Fund Management Center signed agreements with 15 banks including China Construction Bank Shanghai Branch and Bank of Shanghai to jointly release the “Big Data Inclusive Financial Guarantee Cooperation Plan”, which passed the “The big data + guarantee + bank” model supports banks in expanding credit allocation and helping small and medium enterprises resume work and production. • After the enterprise is authorized, the bank obtains public data through the big data inclusive finance application of the city big data center, and forms a list of prospective credit customers after comprehensive evaluation by using financial technology, and then the city guarantee fund guarantees and supports the customers in the list Banks have increased credit allocation, especially focusing on supporting small, medium and micro enterprises that had normal operations in the early stage but encountered temporary difficulties affected by the epidemic. • The data covers social security, provident fund, tax payment, high-tech enterprise identification, etc. that banks are more concerned about. As long as the enterprise is authorized, the bank can obtain these data. After the bank obtains the data, the company will make a portrait of the enterprise. The enterprise can obtain financing without mortgage service. • At the beginning of March, the State Grid Hangzhou Power Supply Company completed the upgrade of power big data and Hangzhou City Brain to “hand in hand”, increasing the power data cruise from once a day to 96 times, allowing relevant government departments to read in real time every 15 min The latest residential mobile power index and enterprise return to work index.

3 Methods and Hypothesis Remuzzi and Remuzzi [17] have suggested several possibilities to help political leaders and health authorities to allocate enough resources, including personnel, beds, and intensive care facilities, to manage the situation in the short time. However, how

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to fully apply the value of Big Data to public opinion detection or topics worthy of research, during the epidemic situation, especially in the longer period, still remains a priority for policy makers. And its value in guiding people’s livelihood has mainly two points: • Filter the public opinion and the trends that are of concern to the whole society, and provide to local governments or institutions as decision-making references, and feasible observation directions and perspectives for public opinion polls that could take control of public sentiments. • Provide data samples to help more Middle and Small Enterprises to develop their local solutions tailored to actual conditions. Hossain, [18] has applied a quantitative evaluation was conducted to assess the characteristics of the current studies and create visualizations of knowledge areas in COVID-19 research by statistical and text-mining approaches using bibliometric tools and R software. This paper uses induction, observation, simulation and derived methods, analyzes the data collected from Google Trends and the statistics from the China National Bureau of Statistics to apply for analysis of Big Data Visualization, and analyzes issues worthy of research such as guiding epidemic control and people’s livelihood. Dingtao et al. [19] have retrieved public query data, using Google Trends, for terms of “2019-nCoV + SARS-CoV-2 + novel coronavirus + new coronavirus + COVID-19 + Corona Virus Disease 2019” between the 31st December 2019 and the 24th February 2020 in six major English-speaking countries, including the USA, the UK, Canada, Ireland, Australia, and New Zealand. They also suggested that public response time to COVID-19 was different across countries, and the overall duration of public attention was short. The current study reminds us that governments should strengthen the publicity of COVID-19 nationally, strengthen the public’s vigilance and sensitivity to COVID-19, inform public the importance of protecting themselves with enough precautionary measures, and finally control the spread of COVID-19 globally. Based on our previous research, we set up these two hypothesis: H1 When China has preliminary control of epidemic, the search for facial masks categorization would turn down. H2 The more is the prosperity of a region, the more is the search for medical products.

4 Results of Evaluation As governments and businesses respond to COVID-19, we have seen significant changes in our daily lives. Even on Google, the way people search has changed dramatically. Because the coronavirus pandemic dominates news, politics, and economics, it maintains a majority of Google searches. In fact, searches related to COVID-19 have become the most popular searches on Google since the outbreak

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100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0

Surgical mask

Respirator

Facial mask

Fig. 4 Google related search volume for „Surgical mask “, „Respirator “ and „Facial mask “ during the whole pandemic in China

of the epidemy, far surpassing other news, weather, politics, Google, Facebook, and Amazon searches. In response to this rapidly evolving trend in new searches, Google company released the Google Trends Coronavirus Center to help advertisers track these emerging searches. Companies could check these search trends regularly and prepare to add new negative keywords to our campaigns to prevent wasting budget. From Fig. 4 we realize that during the period from around 20th January to 10th February in 2020, the search volume has been rising, almost 20 times than before, especially the „Respirator“, has reached its highest on the date of 26th January, which was also the time when chinese people gathered together and celebrated the Chinese New Year holiday, which was totally different situation due to the epideimc, though. Thus, hypothesis 1 accepted. However, we found that the search for „Meltblown cloth“ and „Polypropylene “ as shown in Fig. 5 has risen up from the end of January in 2020, which are t essential materials for producing facial masks. This reflects that the corresponding shortfall in demand for some medical material manufacturers is easing after the resumption of work. From Fig. 6 we could read that at least in the year 2018, the yearly disposable income per capacita of Chinese citizens who live in the eastern and northeastern part of China was definitively higher than people who live in the central and western part, indicates the same level as livelihood. In other word, the most significant economic part in China is the northern, which alongs the seas. Thus, when we take into account the facts shown in this figure, we could find the relationship between the economic developed area and the search for medical products.

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Meltblown cloth

Polypropylene

Fig. 5 Google related search volume for „Meltblown cloth“ and „Polypropylene “ during the whole pandemic in China

The central part

The western part

20%

The eastern part

The northeastern part

34% 58%

22% 24%

Fig. 6 Yearly disposable income of Residents Per Capita by categorizing in Eastern, Central, Western and Northeastern part of China in 2018 (show in percentage of the amount of the whole country, calculated by US dollars)

From Fig. 7 we could clearly notice that the most search area for “respirator” in China are almost the northern part, which is also the area has the most level of economic development. Hypothesis 2 accepted.

5 Conclusion Accelerating the application of Big Data methods will undoubtedly effectively help the battle against epidemics. At present, Big Data technology has been well used in some aspects of epidemic prevention and control, but it needs to be strengthened in

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Fig. 7 Search volume for “respirator” in mainland China during March, 2020

terms of sufficiency of application. In this regard, the implementation of Big Data technologies should be accelerated to allow Big Data to play a greater role. Firstly, we must accelerate the pooling of data resources. Only “running against time, against viruses” can run out of confidence and victory. At present, it is necessary to speed up the establishment of a data analysis team and carry out close cooperation with various departments. At the same time, Big Data application companies should be urged to actively disclose to the society data resources related to epidemic analysis, such as “closing villages”, “road closures” and crowd movements. Further strengthen the system integration, aggregation and classification of data in various fields and channels. On the one hand, on the basis of effectively coordinating various types of data resources, the dynamic depiction of the migration path of the population is further realized, and dynamic monitoring and prevention and control of the risk population are maximized; on the other hand, the accurate data of the epidemic situation are thoroughly grasped The next step is to carry out further research and judgment on the epidemic situation, and then lay a solid foundation for the next step of epidemic prevention and control. Secondly, strengthen the control of data and information resources, and severely crack down on malicious infringements and expose personal privacy. Information sharing in the era of Big Data should be principled and conditional. The leakage of personal information of passengers during the epidemic and even malicious attacks on Hubei and Wuhan people, seriously violated personal privacy, and violated the principle of information sharing advocated in the era of Big Data. As the epidemic continues to spread, we need to transparently trace the source of infection, but we cannot violate personal privacy in the name of “tracking the source of infection”. In this regard, on the one hand, we should give full play to the media effect and strengthen the guidance of the public; on the other hand, we should accelerate the introduction of relevant rules and regulations, accelerate the implementation of legislation in the field of Big Data, strictly define the data use rights, and realize the privacy of individuals. Effective protection.

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Thirdly, accelerate the construction, opening and sharing of public information platforms. The patient travel query tool has been launched recently. Through this platform, the public can accurately grasp whether they have been on the same trip with patients with new coronary pneumonia in the near future, and then determine whether they need to be observed in isolation, which plays an important role in reducing the infection rate. This is also one of the cases where Big Data has been successfully applied in epidemic prevention and control. However, the construction of a Big Data unified information platform is still insufficient. To a certain extent, there have been great deficiencies in terms of resources and personnel deployment in various places in the early stages of the outbreak. In this regard, on the one hand, we should strengthen technological leadership, increase capital investment, accelerate the integration of technical resources, and accelerate the construction of public information platforms for Big Data in medical and other fields; on the other hand, we should pay attention to the openness and sharing of information platforms to achieve The rational allocation of resources further improves the efficiency of resource allocation.

References 1. Al-Najjar, B., Kilincarslan, E.: The effect of ownership structure on dividend policy: evidence from Turkey. Corporate Governance: Int. J. Bus. Soc. 16, 135–161 (2016) 2. Cinelli, M. et al.: The COVID-19 Social Media Infodemic. arXiv:2003.05004 [nlin, physics:physics] (2020) 3. Dingtao, H., Xiaoqi, L., Zhiwei, X., Nana, M., Xie, Q., Zh. M., Yanfeng, Z., Jiatao, L., GuoPing, S., Fang, W.: More effective strategies are required to strengthen public awareness of COVID-19: evidence from google trends.: SSRN. https://papers.ssrn.com/sol3/papers.cfm? abstract_id=3550008. 4. Kaczor, S., Kryvinska, N.: It is all about services—fundamentals, drivers, and business models. Soc. Serv. Sci. J. Serv. Sci. Res. 5(2), 125–154 (2013) 5. Kryvinska, N.: Building consistent formal specification for the service enterprise agility foundation. The society of service science. J. Serv. Sci. Res. 4(2):235–269 (2012) 6. Fiaz, A.S.S., Asha, N., Sumathi, D., Navaz, A.S.S.: Data visualization: enhancing big data more adaptable and valuable. 11(4) (2016). Author, F., Author, S., Author, T.: Book title. 2nd edn. Publisher, Location (1999). 7. Gorodov, E.Y., Gubarev, V.: Analytical review of data visualization methods in application to big data. J. Electr. Comput. Eng. 2013 e969458 https://www.hindawi.com/journals/jece/2013/ 969458/ 8. Gandomi, A., Haider, M.: Beyond the hype: big data concepts, methods, and analytics. Int. J. Inf. Manage. 35, 137–144 (2015) 9. Hossain, M.: Current status of global research on novel coronavirus disease (COVID-19): a bibliometric analysis and knowledge mapping. https://papers.ssrn.com/abstract=3547824 (2020) https://doi.org/10.2139/ssrn.3547824 10. Li, C., et al.: Retrospective analysis of the possibility of predicting the COVID-19 outbreak from Internet searches and social media data, China, 2020. Eurosurveillance 25, 2000199 (2020) 11. Molnár, E., Molnár, R., Kryvinska, N., Greguš, M.: Web Intelligence in practice. Soc. Serv. Sci. J. Serv. Sci. Res. 6(1), 149–172 (2014)

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12. Lidong, W., Guanghui, W., Cheryl Ann, A.: Big data and visualization: methods, challenges and technology progress.Semantic Scholar. https://www.semanticscholar.org/paper/Big-Dataand-Visualization%3A-Methods%2C-Challenges-and-Wang-Wang/e46bc3f36b68ef6cb2a2a 35ffdb6e4a62b4864b3 13. Li, Y., Saxunová, D.: A perspective on categorizing personal and sensitive data and the analysis of practical protection regulations. Procedia Comput Sci 170, 1110–1115 (2020). https://doi. org/10.1016/j.procs.2020.03.060 14. Kryvinska, N., Greguš, M.: SOA and its Business Value in Requirements, Features, Practices and Methodologies. Comenius University in Bratislava, Bratislava (2014) 15. Greguš, M., Kryvinska, N.: Service Orientation of Enterprises—Aspects, Dimensions, Technologies. Comenius University in Bratislava, Bratislava (2015) 16. Lin, Q., et al.: A conceptual model for the coronavirus disease 2019 (COVID-19) outbreak in Wuhan, China with individual reaction and governmental action. Int. J. Infect. Dis. 93, 211–216 (2020) 17. McAfee, A., Brynjolfsson, E.: Big data: the management revolution. Big data viewer: visualization and processing for large image data sets. Nature Methods. https://www.nature.com/art icles/nmeth.3392.Raghav. R. S., Pothula, S., Vengattaraman, T., Ponnurangam, D.: A survey of data visualization tools for analyzing large volume of data in big data platform. In: 2016 International Conference on Communication and Electronics Systems (ICCES), pp. 1–6 (2016). https://doi.org/10.1109/CESYS.2016.7889976. 18. Nathaniel, S., Michael, F.: Straining the system: novel coronavirus (COVID-19) and preparedness for concomitant disasters AJPH https://doi.org/10.2105/AJPH.2020.305618 19. Rajeev, A., Anirudh, K., Xiangfeng, D., Frederic, A. Challenges and opportunities with big data visualization. In: Proceedings of the 7th International Conference on Management of computational and collective international Elligence in Digital EcoSystems. https://doi.org/10. 1145/2857218.2857256.

Analysis of the Practices of Financial Intelligence Units (FIUs) and Other Anti-money Laundering Agencies Within EU Darko Panevski, Tomáš Peráˇcek, and Katarína Rentková

Abstract Increasingly, financial data is considered an important resource in the fight against money laundering and terrorism. In the name of pursuing terrorism financing, banks are required to report suspicious transactions, where Financial Intelligence Units create new databases and produce ‘typologies reports. This work focuses on the chain of suspicious transactions analysis in Europe, from banks, to Financial Intelligence Units, to Courts and examine the way in which financial data are interpreted and shared across the security chain, leading to security decisions like frozen assets, closed accounts or criminal convictions. At present, there is NO comparative research on the work of European FIUs. Our ultimate goal is to make an independent conceptual contribution to the understanding of financial security by analyzing the implementation of different lows mechanisms and information systems models, in order to find better solutions that will ensure efficiency, effectiveness and easy access to the information required.

1 Introduction The beginning of the twenty-first century will be remembered by the globalization phenomena, the rapid development of technology, but also by the profound changes in the style and way of life of people. Primarily by disruptions in the value system. Basic human values like honesty, humanity, respect for others and morality are losing the battle with the materiality. Many people lose these values in the chase for material goods, and they don’t choose ways and means to reach profit. These profits arising D. Panevski (B) Swiss Re Reinsurance, Vienna, Austria T. Peráˇcek · K. Rentková Faculty of Management, Comenius University in Bratislava, Odbojárov 10, Bratislava, Slovak Republic e-mail: [email protected] K. Rentková e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_8

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from illegal activities, globally yield to hundreds of billions of dollars, euros … these are money derived from serious crimes that destroy human lives, fates, (trafficking with drugs, people, weapons, fraud, forgery, tax evasion etc) and these profits year after year grow rapidly, and the same money buy a greater influence in society [49]. This group of activities is complex, often create confusion and there is a high level of ignorance and lack of knowledge for the same. Due to negligence or ignorance anyone can be involved in working with crime groups, who do not choose means and methods how to get to profit. With this work, we want to raise awareness and get closer to our most important partners—entities (financial institutions, notaries, lawyers, accountants, real estate agents and most importantly FIUs). The problem of money laundering is present on a national and international scale and is significantly expressed in those societies where organized crime seeks to legalize the proceeds of money laundering and to infiltrate financial and economic flows, in order to control certain economic and political processes. Criminal activity that precedes the acquisition of illegal income, ways of money laundering and methods of counteraction, contain certain specifics without whose research it is not possible to see all aspects of money laundering, especially in terms of choosing an appropriate strategy to combat it. All this points to the importance of research on this issue, especially money laundering in the function of financing terrorism [48]. Money laundering, as a global phenomenon, causes a number of problems that every country, or every national economy, must face. Characteristic of money laundering is that it not only affects the institutions of the system and business entities, but also affects the daily lives of ordinary citizens. This problem has led to the spread of deviant phenomena in society. The most common sources of money for money launderers are known to be drug trafficking, weapons, white slavery, and so on. If the criminal groups involved in these illegal activities manage to launder money through financial institutions, they will have legitimate financial resources. Given that these criminal groups are involved in various types of crime, it can be expected that these funds will be redirected to illegal activities. If a country’s system, due to its weaknesses, makes money laundering easily feasible, the spread and massing of deviant phenomena is inevitable. Moreover, the country may attract criminals from other countries where more attention is paid to preventing money laundering. In this way, in addition to the spread of deviant phenomena, there can be complete paralysis of the institutions of the system in one country. Money laundering and financing of terrorism are recognized as a global threat, which has its negative consequences on the economy and the democracy in one country. In order to prevent them, numerous governmental institutions work together and are in continuous collaboration with other nongovernmental and private institutions within one system. Their job is to follow the money trail and to detect and prevent crime [41]. This system is defined, we only need to respect the rules of the same, work on finding new better ways to improve it, and each in its domain to give the maximum for a better tomorrow. Guided by the famous Japanese proverb that says, “The chain is strong as its weakest link,” building an effective system for combating money laundering and

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terrorist financing in EU implies continuous improvement and development of the capacity of all institutions involved in the system. Within our research we have ambition to analyses and find what kind of challenges will financial institution face in the future, in regard to anti money laundering, with a final goal of providing guideline and recommendation of how they can prepare accordantly. Finally, by implementing empirical research within the financial sectors of Austria, Slovak Republic and N. Macedonia we strive to examine all shortcomings of the current process within all three FIUs of the respective countries, that have been researched, with ambition to provide a comprehensive solution, model that can improve the process and be used globally. We will try to reach out to the possibility of scientifically basing the procedure of choosing methods for reducing the risk of money laundering and gray economy by the state [18].

2 Defining the Phenomenon of Money Laundering and Explanation on its Characteristics International experience regarding the already discovered ways and methods used by criminals, designed to legalize yields realized by committing crimes, imposed the need for organizing a global i.e. international action to fight against this scourge. These efforts of the international community, resulted in the formation of a task force to combat money laundering, called FATF (Financial Action Task Force on Money Laundering). This international body by following and exposing typologies of money laundering (and more recently, the financing of terrorism), set a number of standards and an array of measures to be taken by states, or different institutions within countries (e.g. financial institutions, government bodies, regulatory and supervisory bodies, etc). The role of entities in identifying possible activities (transactions) related to money laundering or terrorist financing is crucial in the fight against these phenomena, because as a first pillar in the system, more or less, from their success to detect suspicious activity depends the success of the other participants in the system, to prove and corroborate them [4]. By the end of the century, most countries established their FIU. Setting up an FIU is not a luxury but a very useful tool against international crime Small states became more reliant on foreign investment and now are more exposed on money laundering which threatens financial viability and integrity of their country. A “financial intelligence unit” (FIU) is a central, national agency responsible for receiving (and as permitted, requesting), analyzing and disseminating to the competent authorities, disclosures of financial information. Concerning suspected proceeds of crime and potential financing of terrorism or required by national legislation or regulation in order to combat money laundering and terrorism financing.

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Law Enforcement: Most countries have implemented anti-money laundering measures alongside already existing law enforcement systems. Certain countries, due to their size and perhaps the inherent difficulty in investigating money laundering, felt the need to provide a “clearinghouse” for financial information [47]. Agencies created under this impetus were designed, first and foremost, to support the efforts of multiple law enforcement or judicial authorities with concurrent or sometimes competing jurisdictional authority to investigate money laundering. Detection: Through the Financial Action Task Force 40 Recommendations and other regional initiatives (European Union and the Council of Europe in Europe; CFATF and OAS/CICAD in the Western Hemisphere), the concept of suspicious transaction disclosures has become a standard part of money laundering detection efforts. In creating transaction disclosure systems, some countries saw the logic in centralizing this effort in a single office for receiving, assessing and processing these reports. According to Duthell, FIUs established in this way often also play the role of a “buffer” between the private financial sector and law enforcement and judicial/prosecutorial authorities. With the FIU serving as the honest broker between the Information Paper on Financial Intelligence Units and the Egmont Group 3 private and government sectors, this arrangement has in many cases, fostered a greater amount of trust in the anti-money laundering system as a whole [11, 12, 50, 53]. FIUs process great amounts of information that potentially lead to corruption— yet too little has been accomplished to turn this intelligence into evidence and to allow for a detection and confiscation of proceeds of corruption [14]. Money laundering takes place in three phases: placement, concealment and integration.

2.1 Phases of the Money Laundering Process The trend of money laundering is so common in the world, that many discussions take place of this criminal activity, which is not referring only to individuals but also to organized Money laundering process varies from country to country depending on its legal framework and the possibility of tax evasion [24]. Although there is a diversity of this process, the literature is dominated by the opinion that the money laundering process consists of three basic stages: 1. 2. 3.

Placement, Concealment and Integration.

The placement phase is the first stage in the money laundering process. Since money laundering is essentially an activity that is based on ready-made assets, it generates a large amount of cash that originates from illegal activities (for example: drug sale where payment is made in cash, smuggling and etc.). This money then flow inside in the system of financial institutions or small businesses, or smuggled out of the country [2]. The purpose of these so-called money launderers is to convey cash

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away from the place of execution of criminal activity and to avoid detection by the authorities. Here there is the possibility that cash will be also converted into other types of assets (traveler’s checks, postal items, etc.). In the second phase, a concealing of the source of funds is implemented by creating a system of financial transactions aimed to prevent the tracking of the suspicious money trail. The purpose of the concealment is the separation of illegal money from their criminal source [16]. Most often, the concealment is carried out by transferring assets to offshore banks’ accounts or investing in bearer shares of so-called bank accounts of shell companies. Electronic transfer does the transfer of money from illegal origin. Taking into account that over 500,000 transfers of 1 trillion US dollars per day, are carried out worldwide and that most of these transfers are legitimate, it is really difficult to determine whether such a transfer of money is money laundering or not. In addition to the electronic money transfer, criminals in the cover-up phase are dealing with transactions on the securities market. Taking into account the volume of transactions in this market and the anonymity of the process, which is most often guaranteed, it is very unlikely, that the eventual money laundering will be revealed [5]. Integration is the final stage in the money laundering process. At this stage, money is integrated into the legitimate economic and financial system and forms an integral part of the total assets in that system [3]. The integration of money laundering into economic flows is achieved in such a way that a criminal individual or group claims or proves that money is acquired in a legal way. In this phase, it is almost impossible to distinguish between legal and illegal property. In the integration phase, moneylaunderers most often use the following methods: • Establishing anonymous companies in countries where secrecy is guaranteed. The newly-established companies can legally qualify for a loan from a bank and to expand its field of action. Moreover, these companies require tax exemptions for repayment annuities after the loan [19]. • Sending false import or export invoices with an overvalued value of the goods or service that enables the entity to transfer funds from one country to another [51, 52]. • The simplest method is to transfer funds from a bank owned by criminals to a legitimate bank in another country. It is known that in countries that are socalled. A tax haven, money laundering agents easily become owners of banks. The simplest method is to transfer funds from a bank owned by criminals to a legitimate bank in another country. It is known that in countries that are so-called a tax haven, money laundering agents easily become owners of banks [7].

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2.2 Multicriteria Decision Making Model Within Banks as a Successful Criterion for Risk Elimination of Money Laundering Within the Financial Sector The aim of this empirical part of the dissertation is to use a rational and scientifically based approach to solve the problem of decision-making, by testing and applying an appropriate decision support system, in the financial sectors, tested within the three countries in which we did the research (financial systems of Austria, Slovakia and N. Macedonia). This research should point out the possibility of scientifically basing the procedure of choosing methods for reducing the risk of money laundering and gray economy by the state, using the method of multi-criteria decision-making. Precisely the applicative aspect of this part of the research is the basic contribution that should result from the elaborated example [23]. Multicriteria decision making plays a key role in many real-life problems. This has been confirmed in practice, whether it is about state bodies, managers in the company or any other activity, since everyone is faced with situations to choose the best among some alternatives, based on the existing criteria. This research provides an empirical analysis of the decision support system for money laundering and the gray economy in the three states tested, with a recommendation for the creation and implementation of a model that will improve the decision-making process within financial institutions [10]. The structure or definition of the problem are the most important characteristics, relevant for the selection of methods and procedures to support decision-making in that particular problem. Simply put, the degree of structure is the answer to the question of whether the problem is known and whether it is reliably known what needs to be done to solve the problem. Based on the fact that a large number of semi-structured problems are encountered in the financial sector, the main motive for making this part of the paper was to present a decision support system that would significantly facilitate decision-making in this sector. Securing legal cash flows and financial transactions is a major issue that arises when we talk about money laundering and the gray economy [15]. One of the basic challenges we face is how to make the right decision for the observed problem. The notion of decision-making exists as much as civilization itself. Science tries to help decision makers in choosing the optimal decision by developing many theories. One of them is multi-criteria decision-making, which offers representative methods for making the right decision. The method of analytical hierarchical processes (AHP) is one of the most well-known and highly applied methods for multi-criteria decision-making, when the decision is made on the basis of a number of criteria and in multiple time periods. The conceptual and mathematical setting of this method was set by Thomas SAATY with the aim of assisting decision makers in solving complex decision-making problems. This method will be used in this part of the paper to determine the relative weights of the criteria, while the solution to the problem, the selection of an appropriate system to reduce the risk of money laundering and the gray economy, will be obtained by applying the TOPSIS method.

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This method is also very often used in situations of multi-criteria decision-making and is very grateful in its application [45].

2.3 Decision Support Systems Decisions and decision-making are everyday human activities, which are performed continuously during the execution of tasks related to the management of activities and systems. Modern information technologies enable the collection and storage of data that focus on usable data for analysis and provide assistance in making decisions based on these analyzes. Every knowledge-based decision must have the exact consequences that result from that decision [9]. Decision support systems were used as initial forms to support decision-making in business organizations. These systems primarily meant the entire information technology infrastructure that the company, i.e. a certain organization uses to provide informed decision-making. The main advantages of using a decision support system: 1.

2.

3.

4.

Influences the efficiency of the assessment teams in terms of better understanding of the non-compliance management process, and shortens the time required to verify corrective actions. The result of automatic decision support is an increase in consistency and accuracy of the decision made as well as time savings; Effectiveness in solving problems in such a way that management and evaluators can directly get answers to non-routine questions and consider several alternatives at the same time; Facilitating mutual communication so that users of decision support systems are provided with tools to better understand the problem on which an analysis is based; Promoting learning and reasoning based on the experience of other decision support systems provides a better understanding of the mismatch management process and the environment in which decisions are made [29]. Each decision support system consists of at least three subsystems:

(a) (b)

(c)

A database that is part of a decision support system that stores the organization’s input and output data; Model databases that represent a component of a decision support system consisting of business decision models. Each model solves a specific problem in a specific business process. Their task is to generate output based on input data and decision-making models on the basis of which the decision maker can make decisions; The user interface that should enable, in the simplest possible way, communication between the decision support system and the user [26].

The application of an appropriate system for decision support on investment security of banks for the needs of long-term placements of clients will be presented in

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this paper. This system will also consist of three basic parts of each decision support system, which will: (a)

(b)

(c)

The database subsystem contains the relevant data obtained from the analysis of the financial statements of ten banks whose performance is discussed in this paper; The model base subsystem will involve the application of a combination of two methods of multicriteria analysis AHP and TOPSIS, whereby a hybrid decision-making model characteristic of the observed problem is obtained; The user interface subsystem would include a program created in Microsoft Excel that would allow automatic calculation and display of analysis results, which will significantly facilitate the use of this system by users [28].

2.4 Principles of Banking and Financial Operations, Including Anti Money Laundering Principles as a Part of Modern Private Banking Like every market player, every bank aims to achieve the best possible rate of return per unit of share capital, i.e. to maximize its market value. To achieve this goal, a bank must cover its expenses with income and make a profit in order to ensure market expansion. This is the basis of the logic used in doing business in market-oriented economies. In addition, the bank must recognize its competitive advantages over other banks and other economic entities, in order to survive in a fierce competitive struggle in the market [4]. In their operations, banks must adhere to certain principles, i.e. principles. Basically, these are economic and security business principles that are important for all economic entities, not just banks. If these principles are not respected by banks, there are far-reaching consequences for their work and survival. In the event of noncompliance with the economic principles of business by banks, the consequences affect not only the bank but also the business of its customers, as well as the economic system of the country as a whole [8]. That is why there is an intensified control of banks operations by the central bank in order to minimize unwanted cases in banks operations or breach in anti-money laundering principles. In the practice of modern banking operations, certain principles of banking operations have been differentiated, which are especially taken into account when making a decision of clients on long-term secured placements in a particular bank, having in mind the reputation and transparency of the bank, and among which the most important are: (a) (b) (c) (d)

liquidity and solvency principles; principle of efficiency; principle of profitability and most important for this research anti-money laundering principles (i.e. prevention of criminal use of the banking institution) [27].

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2.5 Liquidity and Solvency Principles Simply put, a bank’s liquidity is its ability to meet its obligations on maturities, with the bank’s obligations relating to the bank’s depositors and creditors. Respect for the principle of liquidity is a prerequisite for successful and stable operations of every bank. The principle of liquidity derives from the harmonization of placement deadlines and bank debts. This means that the bank must have the means to meet its obligations at all times [30]. The bank’s balance sheet structure determines the position of its liquidity. On the assets side are financial instruments with varying degrees of liquidity, so that at one end are the most liquid and at the other the most illiquid assets. On the liabilities side of the bank’s balance sheet, some liabilities are liquid, which means that creditors can at any time or at short notice seek money in connection with deposits or loans. Banking management can influence the balance sheet to be more or less liquid. According to Malloney the most important factors that affect the bank’s liquidity are: 1. 2. 3. 4. 5. 6.

Speed of turnover of placed bank funds; Creditworthiness of total bank placements and the degree of their individual liquidity; Consistency of maturity structure of placements for sources of bank funds; Increase in cash deposits; Possibility to obtain loans on the money market or from other banking institutions; Level of collection of overdue loans and related interest [25].

Liquidity indicators and instruments are the basic indicators used for liquidity measurement. The basic indicators, i.e. liquidity ratios in use are: 1. 2. 3. 4. 5.

cash and unsecured marketable securities/total assets; total deposits/borrowed funds; variable assets/liquid assets; total loans/total deposits; liquid assets/total assets.

On the other hand, the term solvency implies the ability of the debtor to settle its due obligations in full. Insolvency is the inability to settle due obligations. In other words, the insolvency of a bank occurs in a situation when the amount of its liabilities exceeds its assets, i.e. when the realized losses exceed the share capital of the bank. The size of the bank’s losses is compared with the bank’s nominal capital, i.e. share capital. If the loss is less than the nominal value of the capital, then the bank is still solvent, because it can cover the loss and other liabilities on other bases. If the loss is higher than the nominal value of capital, then the bank is insolvent, because the nominal value of capital is not sufficient to cover losses and the bank cannot fulfill its obligations to customers [6, 28].

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In connection with the above, one of the solvency indicators is capital adequacy, which indicates the need for the bank to have adequate capital according to its obligations. The amount of capital required depends on the insolvency risk, which is considered appropriate for a given economy, which in turn depends on the combination and structure of assets, liabilities and capital in the bank’s portfolios. The capital ratio is a key financial ratio for measuring a bank’s capital adequacy. The higher this rate, the healthier and better the bank is. A bank with a high capital ratio in terms of assets is more protected from current (operating) operating loss than a bank with a lower rate. A number of indicators are used to measure capital adequacy: 1. 2. 3. 4.

share capital/total assets; share capital/risk assets; total liabilities/equity; equity/total loans.

2.6 Principle of Efficiency One of the most important principles that a bank must adhere to in order to achieve the best possible business results is the principle of efficiency, which is focused on the costs of the bank’s operations. Efficiency affects the security and strength of the bank, the quality and prices of its products and services. All indicators of bank efficiency can be classified into measures of the effectiveness of securing resources with the lowest possible costs and measures of the effectiveness of the use of funds with the highest possible return. The most commonly used indicators from these two groups are: 1. 2. 3.

interest expenses/interest income; provisioning costs (loss costs)/net interest income; interest income/total number of employees.

In order for a bank to operate efficiently, it means to achieve as many effects as possible with the lowest possible costs or to achieve the highest possible effects or results with the same costs [32]. When it is reduced to a monetary unit, then the effectiveness is measured by the ratio of realized costs to one monetary unit of income. To predict the optimal volume of the bank’s economy, the Cobb-Douglas function of the volume of the bank’s economy is most often used, which has the following form: BOC = a + b(BO) + c(POL) + d(POB) + RET; where: a. b.

BOC—operating costs of the bank; a, b, c, d—statistical parameters;

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BO—the bank’s outputs; POL—labor costs; POB—building price; RET—random error term. Measuring the economy comes down to:

Economies of scale (SCE) = percentage change in costs/percentage change in output [23].

2.7 Profitability Principle The basic motive of each bank’s business is to make as much profit as possible, in order to increase the dividend to its shareholders through profits, and by reinvesting in the bank’s capital (shares) to create conditions for increasing credit and financial potential. Financial policy should be set in such a way that the interest rates that banks pay to their depositors are a motivation for new savings. A profitable bank increases its share capital either by retaining part of the realized profit or by issuing additional quantities of shares on the primary market. Starting from the basic principle of profitability: to make as much profit as possible as the difference between income and expenses of the bank, it can be concluded that the goal is to place the collected funds on the market with as little cost as possible, in order to achieve biggest profit [39]. Given its specificity, the bank as a company transforms its goal function from profit maximization to providing a sufficient rate of return per unit of share capital. A higher rate of return per unit of share capital over a longer period of time results in an increase in the market value of the bank [36]. Therefore, it can be said that the essential function of the goal is to increase the market value of the bank, while maximizing the rate of return per unit of share capital is a manifestation of the bank’s target function. The point is that the growing flows of profit rates from previous periods are used as a basis for the projection of the future characteristics of the bank, which is of interest to potential investors in the banking sector. The profitability of the bank is influenced by a number of factors, among which the most important are: the quality of management, the quality of assets, economies of scale, off-balance sheet operations, the bank’s operating costs and the bank’s environment. The main indicators of bank profitability are as follows: 1. 2. 3.

ROI = net income/operating income; ROA = net income/total assets; ROE = net income/share capital.

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2.8 Anti-money Laundering Principles (I.E. Prevention of Criminal Use of the Banking Institution) It is well known that banks and multi-government financial institutions tend to be relatively abused as intermediaries to transfer or deposit dirty money. As reported by Refrigeri et al. in this way the true origin and ownership of money is masked. Widespread abuse of the financial system in such an unfair way directly affects the designated law enforcement authorities. This is of concern not only for European but also for national banking supervision [35]. The primary objective of this Statement of Principles is to strictly specify the direction of banking policy and the procedures that banks will provide at their own expense. It is about working together to help combat money laundering through, in particular, the European banking system. This declaration therefore aims to effectively strengthen existing practices between several banks. In particular, it is about supporting banks’ fight against money laundering [1, 44]. 1.

Proper customer identification:

All banks are required to put in place effective procedures to obtain identification from their new clients. There must be an explicit rule that significant commercial transactions will not take place with untrustworthy transactions [13]. 2.

Strict application of legislation:

Banks ensure trading in accordance with all ethical standards and legislation relating to financial transactions. Banks must not offer services or provide active assistance in questionable banking operations [21]. 3.

Cooperation with law enforcement agencies:

Banks must cooperate fully and without exception with all law enforcement authorities in accordance with specific local regulations regarding client confidentiality. We are of the opinion that they must take care to avoid providing support or assistance to unsuspecting clients. If banks have information and that the money at their disposal comes from crime, they report this fact and break the contact with the suspicious client [40]. 4.

Compliance with the declaration:

All banks must pursue a single policy in accordance with these binding principles and ensure that all employees are demonstrably informed of this bank’s policy. Emphasis is placed on the necessary training and education of employees in this area.

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2.9 Harmonization of Banking Principles Each bank strives to harmonize the operation of the stated principles, whereby we must not give priority to one and neglect the others. All these principles are interconnected and are in a certain degree of interdependence and conditionality, so they cannot exist and act individually. Their action can be described as functional solidarity, i.e. on the principle of feedback. Coordination between the principles should ensure overcoming the conflict that arises due to different views on the place and role of the bank in the economy, as well as the priority of certain principles that contribute to the growth and development of the bank itself [20]. It is very important to accept the fact that changes in the economy and society are something that must be expected and that the relationship between the bank’s potential and market demands must be constantly re-examined if survival, growth and development are to be ensured. Due to the specifics of banking operations and the fact that it operates mainly with other people’s funds, liquidity must be taken into account. On the other hand, because of the profit it makes, profitability must be taken into account, and in addition, macroeconomic interests must be satisfied, so business security must also be taken into account. The management team should not place special emphasis on one principle, it should find the optimal combination in meeting all business principles. If the management forces the principle of liquidity, then it will have enough funds to settle depositors and all other obligations, but it will make a minimum profit (or it will not be at all), which affects profitability. If profitability is forced, it will jeopardize liquidity and even its own security, because there is a possibility of illiquid credit placements (increased credit risk can cause bankruptcy of the bank) [38].

3 Multicriteria Decision Making The idea of the way people make decisions is as old as civilization itself and it is presented through a variety of theories. These theories are not characterized as rigorous scientific approaches found in the literature. Therefore, it is not surprising that the literature in the field of decision-making is in constant progress. What is common to all authors who deal with the issue of decision-making is the view that decision-making is the most important task of every manager and that the decisionmaking process occupies most of their working time [42]. Having in mind the fact that the decision implies the choice of one of the considered alternatives, they can be made immediately or after the analysis of the problem under consideration. There are a large number of methods and techniques that have been developed over time and used to solve decision-making problems in real situations, and we can divide them all into two large groups: single-criteria decision-making methods and multi-criteria decision-making methods [46]. The first group of methods is often

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called operational research methods and includes: linear programming, transport methods, nonlinear, dynamic programming, network planning, game theory, etc. Another large group, methods of multi-criteria decision-making “refer to decisionmaking situations when there are a large number of, most often, conflicting criteria. Precisely this fact represents a significant step towards the reality of problems that can be solved by multicriteria decision-making methods. All classical optimization methods use only one criterion when deciding, i.e. solving, which drastically reduces the reality of the problems that can be solved [22]. The problems that are solved by applying the methods of multi-criteria decision-making have the following common characteristics: • A number of criteria, that is, attributes that must be created by the decision maker; • Conflict between criteria, as by far the most common case with real problems; • Incomparable (incomparable) units of measure, because as a rule, each criterion or attribute has different units of measure; • Design or selection. Solutions to this type of problem are either designing the best action (alternative) or selecting the best action from a set of pre-defined final actions. Taking into account these characteristics, and especially the last multi-criteria decision-making, it can be divided into multi-attribute decision-making (multicriteria analysis) and multi-purpose decision-making. Multi-attribute decisionmaking takes into account problems where there is no continuity in the decisionmaking process [43]. In these problems, a set of alternatives is predetermined, while multi-purpose decision-making deals with decision-making problems in which the decision-making process is continuous. The differences in the properties of the two statements of the mentioned group can be most easily seen from Table 1. Table 1 Features of multi-attribute and multi-purpose decision-making Multi-attribute decision making

Multi-purpose decision making

Attributes

Goals

Goal

Implicit (poorly defined)

Explicit

Attribute

Explicit

Implicit

Limitations

Inactive (included in attributes)

Active

Actions (alternatives)

Final number (discrete)

Infinite number (continuous)

Interaction with the decision maker

It is not distinct

Distinctive

Application

Choice

Designing

Criterion (defined)

Source Made by the author according to data provided in “Critical and descriptive goals in discourse analysis” by FAIRCLOUGH, Norman

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Formulation of a mathematical model of multicriteria decision making The multicriteria decision model has the following mathematical formulation: // STAT//   max f1(x), f2(x), . . . , fp(x) , p ≥ 2 under restrictions: gi(x) ≤ 0, i = 1, m xj ≥ 0, j = 1, n where: • • • • • •

n—number of variables; p—number of criterion functions; m—number of restrictions; X—n-dimensional vector of variables xj, j = 1, n; fk—function (goal) of the criterion, k = 1, p; gi (x)—set of constraints, i = 1, m.

It should be emphasized that the vector of the objective function is maximized at given constraints, since the minimization criteria can be translated into the maximization criteria, as follows: maxfr (x) = −min[−fr (x)], r ⊂ (1, p) By solving the above model, a set of admissible solutions is obtained, the vector X belonging to the set of natural numbers X ∈ Rn , for which applies:   X = x|gi(x) ≤ 0, i = 1, m, xj ≥ 0, j = 1, n The set of solutions of the criterion obtained in this way corresponds to the set of values of the criterion function, i.e. the vector f(x), so that the set of admissible solutions X can be mapped to the criterion set S: f(x) = [f1 (x)f2 (x), . . . , fP (x)] S = [f(x)|x ⊂ X]

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3.1 Defining Terms in the Problem of Decision Making The problem observed in this paper is the selection of an appropriate strategy for reducing the risk of money laundering and the gray economy through banks and the inclusion of several terms that need to be defined at the beginning. Choosing the safest banking strategy is the goal of this problem. Starting from the definition of decision-making, that decision-making is the choice of one of a set of possible alternatives, whereby there must be at least two alternatives in the set, it can be concluded that the application of decision-making theory in the procedure itself is possible. The notion of criteria occupies an important place in the process of deciding on the most favorable bid. Criterion as a term refers to the attributes that are related to the alternatives from which we make a choice. They can be divided into qualitative and quantitative criteria depending on the degree of measurability. Quantitative criteria are those that can be precisely measured and expressed in different units of measurement. Qualitative criteria are those that cannot be expressed numerically. They can be classified into two subgroups: attributes whose values cannot be precisely measured but can still be ragged by “intensity” and attributes on the basis of which no quantitative comparison of alternatives can be made. There are many ways to translate qualitative values of criteria into quantitative ones. The most commonly used scales are: ordinal scale, interval scale and ratio scale. Another criterion that is also used to divide the decision criteria is the direction of correlation of their values and the usefulness they provide. According to the direction of stacking, they differ: (a) (b) (c)

Revenue criteria; Expenditure criteria and Non-monotonic criteria.

In the process of observed selection, a number of criteria are available, which are more or less important in the observed case. The criteria must be precisely defined at the beginning, and in our case, they are indicators of the success of the observed banks: liquidity, efficiency, profitability and solvency. Alternatives are solutions that appear as a choice and from which the best one is chosen. Alternatives represent ten banks, from which the most favorable one is chosen, i.e. in our case the one that shows the highest value of priorities. They have characteristics that meet pre-defined criteria.

3.2 Methods of Multicriteria Analysis There are numerous methods for solving the model of multi-criteria decision-making that can be divided on the basis of several criteria, and the best ones today are: (a) (b)

ELECTRE method; PROMETHEE method;

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AHP method (analytical hierarchical processes); TOPSIS method; SAW method, etc.

Special attention in this empirical research will be paid to the AHP method and the TORSIS method, which are methods of multi-criteria decision-making, designed to assist decision makers in solving complex decision-making problems involving a large number of decision makers, multiple criteria and in multiple periods. Methodologically, AHP is a multicriteria technique based on the decomposition of a complex problem into a hierarchy and will be used in this paper to determine the relative weights of the criteria. The TORSIS method will be used to rank alternatives based on the obtained criteria, by comparing the distance of alternatives from ideal solutions. The goal is at the top of the hierarchy, while the criteria, sub-criteria and alternatives are at lower levels. AHP keeps all parts of the hierarchy in a relationship, so it’s easy to see how changing one factor affects other factors. AHP has found its application in various areas of strategic management, and the importance of the scientific contribution of AHP is evidenced by the fact that this method has been studied and developed in detail through numerous doctoral dissertations, scientific papers and conferences dedicated to this method [34]. The decision-making process is often very complex due to the presence of conflicting goals among the available criteria or alternatives. The problem is to choose the alternative that will best meet the set goals. The area of application of this method is multi-criteria decision-making where, based on a defined set of criteria and attribute values, the most acceptable choice is made for each alternative. To facilitate the application of this method, a software tool from the Expert Choice decision support system was developed. The process of realization of the AHP method includes four basic phases: (1)

(2)

(3)

(4)

Structuring a problem that consists of decomposing any complex decision problem into a series of hierarchies, where each level represents a smaller number of manageable attributes. They are then decomposed into another set of elements corresponding to the next level. Such a hierarchical structuring of any decision problem in this way is an effective way of dealing with the complexity of real problems and identifying significant attributes in order to achieve the overall goal of the problem. Data collection is the beginning of the second phase of the AHP method. The decision maker assigns relative grades in attribute pairs, one hierarchical level, for all levels of the entire hierarchy. The most famous scale used to assign weights is the Saaty nine-point scale. Estimation of relative weights implies that the comparison matrix, in pairs, is translated into problems of determining eigenvalues, in order to obtain normalized and unique eigenvectors, with weights for all attributes at each level of the hierarchy. Determining the solution to the problem is the last phase, which involves finding the so-called composite normalized vector. After determining the vector of the order of the values of the criteria in the model, in the next round it is necessary

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to determine within each observed criterion, the order of importance of the alternatives in the model with respect to the same procedure [33, 45]. The TOPSIS method (Technique for Order Preference by Symilarity to Ideal Solution) ranks alternatives according to the distance from the so-called ideal solution and the ideal negative solution to be determined first. The optimal alternative is the one that is geometrically closest to the ideal solution, i.e. the furthest from the ideal negative solution. The ranking of alternatives is based on the “relative with the ideal solution” thus avoiding the situation that the alternative has the same similarity with the ideal and with the negative ideal solution. The ideal solution is defined by the best rating values of the alternatives for each individual criterion; conversely, the negative ideal solution is represented by the worst value rating alternatives. TOPSIS consists of 6 steps: (1) (2) (3) (4) (5) (6)

Normalization of decision matrix values; Multiplication of normalized matrix values by weight coefficients of criteria; Determining ideal solutions; Determining the distance of alternatives from ideal solutions; Determining the relative proximity of alternatives to the ideal solution and Ranking alternatives.

The advantages of using the TOPSIS method are that the user can express his preferences by assigning weight coefficients to the criteria (through determining the relative weights to the criteria), along with easy application of the method in practice and clearly defined range of alternatives. The disadvantages of using the TOPSIS method are that the solution directly depends on the input values (evaluation of alternatives by criteria) and the criteria are linear in this method.

3.3 Combining AHP and TOPSIS Methods in Multi-criteria Evaluation Optimization Investment Benefits of Banks The development of an appropriate decision support system for bank security in order to reduce the risk of money laundering and the gray economy is a problem that will be solved by a combination of AHP and TOPSIS methods. A mitigating circumstance when using any method of multi-criteria decision-making is the fact that all of them are software-supported [31]. The purpose of this research is to show how in practice, with using a combination of the mentioned methods, an optimal solution can be reached in order to facilitate the work as much as possible when making a decision on choosing a strategy for reducing money laundering risk in the banking sector. Also, an important requirement that will be satisfied in this way is the scientific basis of the conducted decision-making procedure. The criteria on the basis of which the evaluation of alternatives in this case will be performed are:

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• K1—The bank’s liquidity, which is its ability to meet its obligations on deadlines maturities, where the bank’s liabilities relate to depositors and creditors of the bank. As well as the bank’s solvency i.e. the ability to settle its due obligations within the prescribed deadlines. Respect for the principle of liquidity and solvency is a prerequisite for success and stability operations of each bank; • K2—Efficiency that is directly focused on the bank’s operating costs. Efficiency affects the security and strength of the bank, the quality and prices of its products and services; • K3—Profitability of the bank, as an aspiration to make as much profit as possible as the difference between the income and expenses of the bank, aims to place the collected funds on the market with the lowest possible cost at the highest possible price, in order to make a profit; • K4—Prevention of criminal use of the banking institution with strong and standardized anti-money laundering programs and mechanisms. Aspiration and ability of the bank to successfully fight financial crime and bank fraud driven by demands to protect the bank’s assets, reputation as well as by regulatory compliance. These criteria will be considered on the basis of collected data on indicators of financial operations of banks and financial institutions in the Austria, Slovakia and N. Macedonia in the period between 2017 and 2019. Taking into account the final sample for operations of ten banks from each of the three countries tested in this research [37]. The first subsystem of the decision support system is a database which in our case consists of the data collected and they are shown in Table 2. Next step is estimation of relative weights of criteria. At the beginning of the processing of the problem, it is necessary to start from determining the relative weights criteria, i.e. the significance of the criteria. The Table 2 Decision matrix (database) Criteria Alternatives

K1

K2

K3

K4

Bank 01

1.679

0.369

0.339

16.850

Bank 02

1.550

0.269

0.339

24.820

Bank 03

2.909

0.430

0.453

17.239

Bank 04

1.769

0.420

0.131

18.850

Bank 05

1.250

0.389

0.062

17.759

Bank 06

2.390

0.409

0.061

17.468

Bank 07

1.469

0.420

0.149

26.612

Bank 08

2.120

0.370

0.230

15.611

Bank 09

1.809

0.321

0.130

24.362

Bank 10

2.301

0.318

0.120

26.471

Source Produced by the Author

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AHP method will be used here for determining the relative weights of the criteria. To estimate the relative weights of the criteria the Saaty’s 9 scale of relative importance will be used (Tables 3 and 4). Application of TOPSIS method for determining the optimal solution: The second part of the model involves the application of the TOPSIS method to find the optimal solution to the observed problem (Tables 5, 6 and 7). Bearing in mind the fact that all criteria belong to the maximization criteria, it follows that: Ideal solution : A∗ = {0.278, 0.036, 0.119, 0.04} Table 3 Saaty’s 9 scale of relative importance Intensity of relative importance

Definition

Elaboration

1

Equal importance

Two activities contribute equally to the objective

3

Moderate importance of one over Experience and judgment slightly another favor one activity over another

5

Essential or strong

Experience or judgment considerably favors one activity over another

7

Very strong importance

An activity is strongly favored, and its dominance is demonstrated in practice

9

Extreme importance

The evidence favoring one activity over another is of the highest possible order of affirmation

2, 4, 6, 8

Intermediate values between two adjacent judgments

When compromise is needed between two judgments [17]

Source Produced by the Author

Table 4 Estimation of relative weights of criteria Liquidity\solvency

Efficiency

Profitability

Anti-money laundering mechanisms



W(/4)

0.596

0.536

0.663

0.438

2.231

0.558

Efficiency

0.118

0.106

0.074

0.188

0.485

0.123

Profitability

0.199

0.322

0.221

0.313

1.053

0.261

Anti-money laundering mechanisms

0.088

0.034

0.043

0.063

0.227

0.058

Liquidity\ Solvency

Source Produced by the Author

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Table 5 Decision-making matrix that needs to be normalized Criteria

Liquidity\solvency

Efficiency

Profitability

Anti-money laundering mechanisms

Alternatives

w1 = 0.6

w2 = 0.1

w3 = 0.2

w4 = 0.1

Bank 01

1.681

0.371

0.341

16.861

Bank 02

1.549

0.271

0.339

24.934

Bank 03

2.909

0.433

0.451

17.251

Bank 04

1.772

0.421

0.132

18.852

Bank 05

1.253

0.389

0.058

17.762

Bank 06

2.392

0.409

0.059

17.471

Bank 07

1.468

0.421

0.151

26.613

Bank 08

2.119

0.374

0.231

15.61

Bank 09

1.810

0.333

0.132

24.362

Bank 10

2.088

0.323

0.121

26.471

Source Produced by the Author

Table 6 Normalized decision matrix Criteria

Liquidity\solvency

Efficiency

Profitability

Anti-money laundering mechanisms

Alternatives

w1 = 0.6

w2 = 0.1

w3 = 0.2

w4 = 0.1

Bank 1

0.268

0.311

0.453

0.253

Bank 2

0.247

0.227

0.453

0.375

Bank 3

0.464

0.361

0.599

0.259

Bank 4

0.282

0.353

0.173

0.283

Bank 5

0.199

0.328

0.079

0.267

Bank 6

0.381

0.345

0.078

0.263

Bank 7

0.234

0.353

0.199

0.4

Bank 8

0.338

0.311

0.306

0.234

Bank 9

0.288

0.277

0.173

0.366

Bank 10

0.366

0.269

0.159

0.398

Negative ideal solution : A− = {0.119, 0.023, 0.015, 0.023} If we denote the distances from ideal solutions with Si* and Si− , we get the results shown in Table 8. Determining the relative proximity of alternatives to the ideal solution is the next stage, which involves calculating using the following formula: Qi∗ = Si− /Si∗ + Si− , i = 1, . . . , n

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Table 7 Multiplication of normalized matrix values by weighting coefficients Criteria

Liquidity\solvency

Efficiency

Profitability

Anti-money laundering mechanisms

Alternatives

w1 = 0.6

w2 = 0.1

w3 = 0.2

w4 = 0.1

Bank 01

0.162

0.032

0.091

0.024

Bank 02

0.148

0.023

0.09

0.037

Bank 03

0.278

0.036

0.119

0.025

Bank 04

0.169

0.035

0.034

0.028

Bank 05

0.119

0.032

0.016

0.027

Bank 06

0.228

0.034

0.015

0.026

Bank 07

0.14

0.035

0.039

0.04

Bank 08

0.202

0.031

0.061

0.023

Bank 09

0.173

0.027

0.034

0.036

Bank 10

0.219

0.027

0.031

0.039

Table 8 Determining the distance of alternatives from ideal solutions

Distance from ideal solutions Alternatives

Si*

Si−

Bank 01

0.376

0.086

Bank 02

0.134

0.081

Bank 03

0.015

0.187

Bank 04

0.139

0.055

Bank 05

0.19

0.009

Bank 06

0.118

0.105

Bank 07

0.159

0.038

Bank 08

0.097

0.095

Bank 09

0.135

0.058

Bank 10

0.106

0.195

Source Produced by the Author

Based on the obtained solutions, the ranking of alternatives can be performed (Table 9). Based on the implemented TOPSIS method, it was decided that the most suitable bank for investment in regard to security of investment, stability of the bank and anti-money principles implemented to prevent criminal use of that institution, is bank number 5. It has the best combination of elements, scoring high in our model, harmonizing all 4 principles in great manner, and implementing methods for reducing the risk of money laundering and gray economy with parallel positive effect on profitability, efficiency and liquidity and achieves the highest rank among all alternative.

Analysis of the Practices of Financial Intelligence Units … Table 9 Ranking alternatives

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Alternatives

Relative proximity

Rank

Bank 01

0.383

5.

Bank 02

0.353

6.

Bank 03

0.933

1.

Bank 04

0.249

8.

Bank 05

0.048

10.

Bank 06

0.456

2.

Bank 07

0.171

9.

Bank 08

0.444

4.

Bank 09

0.266

7.

Bank 10

0.454

3.

Source Produced by the Author

The third part of the decision support system solution, that strave to point out the possibility of scientifically basing the procedure of choosing methods for reducing the risk of money laundering and gray economy by the state, is the user interface which provides communication between users and the system in the simplest way. For the purposes of this research, in the Visual Basic for Applications program, we have created a program that provides solutions, i.e. a range of alternatives, in a simple way after entering the database After starting the program, a note appears informing you that you have started the program for determining the strategy for reducing the risk of money laundering in the payment system of banks. By clicking the OK button, you continue with the work and further calculation (Fig. 1).

Fig. 1 User interface. Source Produced by the author

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Fig. 2 The final rank of bank. Source Produced by the author

Clicking on the calculate button gives a ranking alternative. However, if any of data in the database is missing, the program warns you about it. The program also offers graphical representation of the solution, as an option after the ranking is completed (Fig. 2).

4 Conclusion From the obtained chart in Fig. 3, it can be seen that the largest changes in value are achieved by alternative 3 where due to the reduction of the weight of the criterion “liquidity”, the increase in the weight of other criteria only further proves the conclusion that this bank showed the lowest risk of money laundering in the payment system. Also, in general, with other alternatives, the conclusion is that due to the growing weight of the criteria “efficiency”, “profitability” and “anti-money laundering mechanisms” their value is growing too, but still insufficient to achieve higher value compared to alternative 3. Everyone—individuals, politicians, experts, business people, are considering and making small and large decisions on a daily basis-decisions concerning individuals, families, business systems or social communities—regions, countries and the world as a whole. For most cases, i.e. problems that are solved, there are several solutions. But the question that arises is, which solution to choose? The one who considers and makes a decision takes into account several aspects of the problem he is solving: some reasons speak in favor of making a decision in one way, but other reasons say that such a decision is reconsidered and often changed.

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Fig. 3 Influence of weight change of all criteria on alternatives. Source Produced by the author

Thus, the practice of solving problems in the financial sector shows that they can be solved in different ways, respecting the appropriate criteria. In recent years, when it comes to the financial sector of the Republic of N. Macedonia and Slovak Republic, positive changes have taken place, which is confirmed by parameters that indicate increased efficiency of the banking system, growth of loans and deposits with banks, growth of capital market turnover, stimulating household savings, etc. which has a positive effect on reducing the risk of money laundering and the gray economy. The Austrian financial sector as leading from these three have seen these changes in very early stages and currently they are functioning flawlessly. In order to achieve even better results, it is necessary to provide additional investment funds by customers, as well as the establishment of a system of networked monitoring of cash inflows and outflows, which will make decisions based on appropriate indicators obtained by applying the best ways to measure bank performance, is certainly under the jurisdiction of the NBS. The application of decision support systems combines the results of economic theory with the data provided by economic statistics. The key characteristics of high-performance banks are reflected in providing high liquidity, maximizing profits, cost control, etc. There are several approaches to measuring the performance of commercial banks. They all come down to a greater or lesser choice of certain coefficients or ratios. Financial ratios or indicators represent relative relations that should determine in advance the degree of certainty that the bank will be able to monitor the state of payment operations of deposits and placements. The obtained sizes can be compared with other banks, planned sizes or with the sizes of the bank realized in the previous period, as well as with international payment operations, i.e. foreign banks.

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We have proven the possibility of using a number of representative methods available to the decision-making process with goal of reducing the risk of money laundering for each bank separately, which facilitates the work and raises the quality of the decision making within the institutions, to a higher level. Precisely on the example of using the combination of AHP and TOPSIS method, it is shown how a decision can be made by a precise procedure, while respecting all the set criteria on the basis of which the selection is made. Also, in this way, it has been shown that there are significant arguments for the selection procedure to be based on scientific grounds. The development of the decision support system was performed with data collected from 10 most successful banks from the financial sectors of Austria, Slovakia, and North Macedonia. Data on their operations refer to 2017–2019 year and were collected from annual financial reports with help of National Banks from the three countries which were partners for conducting this research along with FIUs of the respective countries. By applying the appropriate system, the banks were ranked, and it was determined that the bank under number 3, bank coming from Austrian financial system with its indicators has the best characteristics. After our research on this topic and on tree independent FIUs from Austria, Slovakia and North Macedonia, we can conclude that preventing money laundering is an extremely complex issue that needs to be addressed appropriately. Given that money laundering itself is a “living matter”, i.e. a process that is constantly evolving and seeking new forms of manifestation, based on our research will provide some guidelines and recommendations for applying the process of preventing money laundering in the future. With the help of the empirical part of this research we have shown that in practice, solving problems in the financial sector, can be done in different ways, respecting the appropriate criteria, and appropriate model solution. Technology can be very helpful in detecting suspicious transactions. Money laundering software can be found in a variety of shapes and sizes on the market, but most often their price is high. For that reason, the person responsible for preventing money laundering must justify investing in modern technology. It will only do so if it changes its philosophy—money laundering is not only detected by monitoring certain activities or transactions, but also by a complex and dynamic risk assessment. The technology, i.e. the software solution to enable efficient fight against money launderers. Namely, these criminal entities know that they can be detected while laundering money and try to cover up their activities. However, certain features of money laundering cannot be obscured by a simple change in the frequency, amount or type of transaction. That technology, which allows for a more comprehensive analysis of the risks of money laundering, will help avoid costly investigations into legitimate transactions. We hope that this research will help point out the possibility of scientifically basing the procedure of choosing methods for reducing the risk of money laundering and gray economy by the state, using the method of multi-criteria decision-making, implementing the findings and solutions used in our model.

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Modern Approaches to Leadership Development—An Overview Helena Kiß and Rozália Sulíková

Abstract In today’s economy, organizations are distinguishing themselves by qualified leaders. These decisively determine the success or failure of an organization and thus are an elementary part of personnel development. But before leaders can be effectively deployed, they need be identified as potentials and further developed. Hereby, it is of importance to identify the professional and interdisciplinary qualifications of leaders and to prepare them to success-fully meet future organizational requirements and thus to contribute to its success. The present work examines which modern approaches to leadership development predominate in both theory and practice. The result shows that there is an enormous wealth of opportunities that organizations can embrace. It would therefore make sense for further research to empirically investigate whether and which measures are known to the organizations and, above all, if they are actually being used effectively. This article is an excerpt from the author’s dissertation, with the subject “Modern Leadership Development as a Competitive Advantage of Organizations—Analysis of Approaches to Developing Leaders in Selected Financial Institutions”, published in 2020 at the Comenius University in Bratislava.

1 Introduction For all organizations, personnel are one of the most important sources of sustainable competitive advantage. Particularly in the case of strongly changing market situations or in times of increasing competitive pressure and advancing digitization in the financial industry, it is necessary for these organizations to identify themselves with qualified personnel. Leaders play a crucial role here because they can decide on the success of an organization through their actions and their influence on core processes. H. Kiß (B) · R. Sulíková Faculty of Management, Comenius University in Bratislava, Odbojárov 10, 820 05 Bratislava 25, Slovakia R. Sulíková e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_9

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For this reason, organizations are increasingly relying on leaders with emotional and cultural intelligence as well as personal characteristics—i.e. According to investigations in this field, for example, it is primarily networked thinking, openness, willingness to learn and role model function that are expected of leaders in the digital age—which Liebermeister, head of the Institute for Leadership Culture in the Digital Age, has shown [1]. Digitization promotes and demands courage to change and move something and serves as a driver of leadership behavior. It is in the interests of both the organization and the leader to continuously develop in order to run the organization successfully. Leadership development is therefore an important success factor in practice in order to attract and retain high potentials and to develop them into “ideal” leaders. Most organizations have recognized that the acquisition and retention of high potentials has become a real “war for talent”. In addition, due to the demographic development, more and more leadership positions will be vacant in the next few years that have to be filled with qualified employees [2, 3]. In addition, only 13% of millennials are striving to assume a leadership role, as a survey by the personnel service provider Manpower reveals [4–6]. A widespread method of filling vacancies is to cultivate your own candidates in a talent pool or with the help of your own succession plans. Employer branding is becoming more and more important for securing your own staff and attracting new qualified candidates. In addition to remuneration or the receipt of benefits in kind, other features such as flexible working hours, mobile/home office and a good working atmosphere for today’s candidates come closer to the fore when it comes to the attractiveness of an organization [7, 8]. As the demands on today’s leaders have changed and the pressure to develop a recipe for success for leadership is increasing, this task is becoming more and more difficult for organizations. In addition, leaders repeatedly receive new knowledge requirements from their organization. In leadership roles in particular, the trick is to balance between the massive pressure to implement “from above” and the interests of employees of all generations (here Generation X, Y and Z). The leaders must have not only technical, but also general qualifications [9, 10]. Only a small part of these general key features can be learned through further training measures or training positions. Many of the most critical characteristics of executives for success depend on psychological-curricular developments and in various ways cause other, much more tangible characteristics. Not least because of global networking and the resulting increasing digitalization, processes are becoming more abstract for leaders, results are less tangible, and communication is more complex. In recent years, the ongoing cooperation in international competition has been increasingly expanded. Sales markets in China and other parts of Asia no longer necessarily require a pure command of the national language, but are based on your own local business network as well as knowledge and sensitivity for region-specific, cultural differences, as these determine the success or failure of upcoming negotiations. As Lou Gerstner, the former Chief Executive Officer of IBM once said: “Culture isn’t just one aspect of the game—it is the game” [11, 12].

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For this reason, organizations at all management levels place great value on modern access to their development programs, in particular their content, methods, transfer into practice and evaluation of the programs. They stand by their leaders as companions and advisors. However, the development alone does not lead to the hoped-for increase in the organization’s performance. Leaders need a work environment that enables them to perform at their best and in which they can develop. At the same time, it is their job to ensure that the employees in the area of responsibility are managed in such a way that they remain healthy and motivated. Particularly in view of the increasing intensification of work, topics such as “healthy” leadership are therefore becoming socially relevant topics and keywords such as burnout and other psychological complaints are present in the media on a daily basis, which is also in line with the needs of today’s Generation Y [13–16]. It is therefore of particular interest to organizations whether a recipe for success or even a roadmap for “ideal” leadership can be derived from current practical experience and how success can be comprehensively defined by leaders? However, organizations need to know that there is not only one effective style of leadership. Leadership behavior varies depending on the situation and environment. Therefore, this work presents what the literature on this topic says as possible measures, so that a foundation of options can be summarized, which should serve for further research, especially empirically. This is worked out in the following chapters. The summary and the further outlook round off this work.

2 Modern Approaches to Leadership Development 2.1 Personnel and Leadership Development One of the main reasons that organizations invest in the education and training of employees and leaders is to improve and preserve their human capital [17–20], whereby the development of individual leaders is the result of a targeted investment in human capital. Leadership development typically aims at individual knowledge, skills and abilities that are related to formal, i.e. H. hierarchically defined leadership roles are linked [21]. In this context, the question arises in particular which factors are relevant for the development of successful leadership skills and for leadership potential. Lord and Hall recommend that leadership development should begin at the skill level and progressively align [22]. With their approach, the authors pursue a general theory of learning and expertise that is still valid today. Associated with this are changes in information processing and the underlying knowledge structures, which are gradually being redefined as skills. In the course of development, a leader makes progress in his/her skills at the various levels (from beginner to advance to expert level). With each advancement or with each organization level, a leader is faced with

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increasingly difficult tasks, while at the same time increasingly demanding knowledge structures and information processing skills are required within the broadly defined task [23–27]. These tasks in turn differ from area to area and not only represent an additional difficulty for leaders in their advancement, but they also require individual development approaches in order to optimally meet the requirements and changes that arise. In requirement areas with a high degree of variability, it can happen that the development of standard concepts for problem solving is prevented because new problems in the area arise so quickly and require individual solutions that the leader is not able to analyze the underlying basic structure and to solve (economic complexity reduction through targeted learning). Lord and Hall identified a specific structure in developing a leader’s identity; the findings are still used today in the literature. A distinction was made between the following three levels: In the first level, the individual level, the leader defines himself through his/her uniqueness and the differentiation of the self from others. In the next level, the relational level, the leader expands his/her self-image through roles and relationships with others. On the third level, the collective level, the self-image flows into group or organization affiliation. In parallel to the identity, meta-cognitive abilities develop which enable the leader to gain better access to knowledge, more critical goal setting, more reflective action and a more appropriate social reaction [22, 28–30]. The cognitive resources released in the process can help the leader to more effective self-regulation, which strengthens the leader’s control over himself, for example through good time management. Self-regulation also includes the control and communication of emotions to others and thus directly influences the behavior of the leader. In order to be able to lead effectively, the leader must now be able to question himself and be aware of his abilities [29, 31]. The process of meta-cognition is therefore very important in the maturation of executives and contributes—as well as the understanding of the situation and the cooperation with others—to the development of their identity and thus their behavior. In addition, further possibilities for social interaction can be derived from the amount of skills that a leader develops over time, so that this also influences their behavior. Since the executive’s development path is limited by his/her personality, researchers have looked at further possibilities for executive self-development. Boyce, Zaccaro and Wisecarver have created a model for this, which predicts leadership development activities on the basis of dispositional properties. This model was later tested and confirmed in an empirical study with younger military executives. The identified characteristics that could be associated with development activities were work orientation (e.g. work mentality/involvement and organizational commitment), control orientation (more self-efficacy, conscientiousness, openness to experience and intellectual maturity) and career growth orientation (greater growth within career/career research and behavior seeking feedback). Depending on the strength of their mastery and work orientation, people were more or less motivated to engage in self-development activities. Those who were more career-growth oriented were found to be better qualified in carrying out self-development activities [32, 33]. Overall, the results show that work orientation, control orientation and career growth orientation

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play a key role in the self-development of leaders. Reichard and Johnson further claim that self-development is an inexpensive way for organizations to develop leaders [34].

2.2 Systematic Approach to Development Programs The systematic approach to leadership development enables the management of the qualification programs and ensures that the leader is prepared for his/her job by having the knowledge, skills, and abilities to do his/her job in the best possible way. As part of the systematic approach, it can be ensured within the organization units that important topics/content and skills are identified, and suitable learning methods are used and applied. The final evaluation of the development measure enables the effectiveness to be examined and improvements to be shown. This is why this is discussed in more detail in the following two sections.

2.2.1

Content Focus and Method of Development Programs

The core element of any training is the content. With their study, Bates and Khasawneh have shown that the training content and the training goals as well as the associated materials must be relevant to the topic and, above all, must have a strong connection to the participants’ everyday work [35]. To this day, nothing has changed [36, 37]. Other important factors to consider are the motivation of the participants, their reactions, a positive work environment and the methods chosen. The trainer must therefore ensure that the participants can work in and with the training environment and that they can relate to the transfer to the real world of work. This underlines the usefulness of a needs analysis prior to the training so that the training content is relevant [38, 39]. In a qualitative study that examined the various types of support provided by the organization, Hawley and Barnard found that regular networking and exchanging new ideas about the training content with the other training participants positively increases the transfer of what has been learned into everyday work. This knowledge is still used in today’s literature. Although support from work colleagues and acquaintances has the strongest influence on learning success, this effect fizzles out if there is no support from management. This can be avoided through an effective training and target agreement plan and direct implementation [40–43]. According to Lim and Johnson, the lack of practicability of newly learned content in the workplace represents the greatest obstacle to transfer, i.e. it hinders the transfer of the newly learned content to different task situations and thus its maintenance. More recent studies still refer to this finding today, which underlines the continued relevance [44–47]. Furthermore, the results of qualitative studies show that a number of factors from the work environment have a negative effect on training transfer. These factors mainly include a high workload, time pressure, the lack of reinforcement of the trained behaviors, the lack of performance feedback and the perception that the

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time of training needs to be made up. The organization must minimize all of the above-mentioned obstacles as much as possible [48–51]. In order to be able to better capture the experience of executives as employees and to guarantee an easier and more sustainable transfer into everyday work, it is now important to optimally coordinate the content, i.e. theory and practice. In a detailed meta-analysis with 8980 samples, Donovan and Radosevich researched decades ago that the combination of theory and practice as a learning method leads to greater learning success (participatory method). However, the impact of this on the actual transfer into everyday work was minimal. Nevertheless, this investigation is still justified in today’s literature [52–56]. In contrast to passive participation in training, such as B. a lecture, the participant is involved in an active learning approach in the training process through carefully constructed activities [57]. This can be explained by the fact that active learning extends the attention span of adults [58–62]. The level of research in learning situations in which a trainer leads the training has so far been insufficient for further observations. An interesting addition at this point is a current working paper from the Harvard Business School, which goes one level deeper in terms of personality behavior in terms of openness to new content among colleagues. The researchers found that women update their opinions 13% of the time more often than men and that so-called superstars do this less often than everyone else in 24% of the cases [63]. Casciaro, Edmondson, and Jang also determine that collaborative knowledge transfer is the essential success factor of organizations since value-destroying silos are minimized through cross-departmental collaboration [64]. Burke, Sarpy, Smith-Crowe, Chan-Serafin, Salvador and Islam found in their empirical research on the relative effectiveness of occupational safety training and health that active learning, e.g. B. the inclusion of dialogues and role play (“visual learning”), the learning process positively strengthened and negative side effects reduced, as in this example the reduction of injuries in the workplace [65]. However, the lack of empirical data on active learning methods continues to leave a large void. While there are numerous defenses of learning success, the claim that what has been learned is successfully transferred to everyday work remains unfounded. In order to be able to design and enable agility of structures, processes and behavior of employees, leaders themselves have to be agile. For this they need the strength of self-reflection, but also regular feedback from their colleagues and employees, which should serve as the basis for their own change processes [66, 67]. Agile learning is best done in real everyday work, “on demand” and at short notice, whenever the leader recognizes his/her learning needs (spontaneous, situational learning) and this self-learning is enabled or promoted [68]. The procedure is usually characterized by stages with direct application relevance: learning, acting, and improving—in selforganization and in a collegial, small learning unit/team [69]. The learners take on a decisive active role and are accompanied by so-called “agile instructors” who offer them assistance in organizing their learning themselves, e. B. by submitting learning offers or taking on a moderator role. Agile learning formats can be [70]:

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• Brown Bag Meeting—collegial exchange to promote knowledge transfer in the team and in the organization. An employee either reports on his/her work or gives a short lecture, which is then discussed in the panel by a maximum of 30 participants. The format takes place over lunchtime and does not last longer than an hour. You can bring your own lunch (known from the USA, where lunch is usually packed in a brown paper bag). • Lean Coffee—open, collegial exchange of knowledge in smaller groups on specific topics and times, which are agreed upon in the group at the beginning. • Ted Talks—thinkers, doers and artists come together to personally present approaches and new ideas/visions to a selected audience. The talks last no longer than 18 min and aim to arouse inspiration and enthusiasm in the audience. The talks are subsequently available as a video on the network. • Working out Loud (WOL)—learning-oriented exchange in a network of three to five people. The exchange takes place regularly over 12 weeks in so-called circles. The participants work together—personally or virtually—on their individual goals in order to make their own work transparent for everyone. “Circle guides” help to structure the meetings. The 360° feedback has gained relevance in the relevant literature over the past two decades and is still one of the most important and effective feedback methods today [71–74]. In addition to other practices (e.g. individual coaching, mentoring, networking, active vs passive learning and classic seminars), it offers an opportunity to further develop leadership skills. The 360° feedback provides the feedback recipient with valuable information on how his behavior is perceived, understood, and experienced by others. With this assessment (external image) the leader can check whether his/her self-perception (self-image) corresponds to it. Without such feedback, she cannot understand whether her behavior is targeted, efficient or assessed as acceptable by the community. In addition, there is the complexity of the different perspectives on the work, as employees, team members, customers, colleagues, and superiors give an assessment of the behavior, skills, and performance of the leader. This assessment is then contrasted by the self-assessment [75]. However, it would be too easy to assume that a leader changes his/her behavior just because they have received feedback. Shipper, Hoffman and Rotondo found that feedback in the form of employee appraisals is not valued or given voluntarily in some cultures. For example, in some Asian cultures, criticism should be avoided. Furthermore, colleagues in collectivist cultures are reluctant to be critical of a group member (whether directly or indirectly) for fear of disrupting group dynamics and harmony [76, 77]. Any direct or negative feedback to a particular person would be discouraged, since social interactions in collectivist cultures often occur in groups [78]. Additionally, it may be possible for individuals to receive information that sets them apart from the community, and individual feedback can be avoided. Sully de Luque and Sommer suggest that individualistic cultures would provide more individual feedback, while collectivist cultures would provide more group-oriented feedback [79]. Research also suggests that culturally adapted leaders are better able to cope with the cognitive demands of

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working in a multicultural environment. Greater cultural exposure is associated with greater transnational social capital [80], cultural intelligence [81] and a better ability to cognitively cope with demands from multiple cultures [82–84]. The actual contribution of the four sources of assessment (supervisors, colleagues, employees of the leader and self-assessment of the leader) to the evaluation of the leader remains questionable, since until today the general problems of the organization form the core of the derivation, instead of, for example, a focus on the level of the quality of the statements to have [85]. In addition, the question arises at which point 360 ° feedback has the greatest influence in a management career and to what extent these feedback initiatives impair organization performance. In particular annual development meetings help leaders plan their careers, whereby the next development steps in a management career are recorded. It is important for organizations to know what potential their employees have and how they can be further developed over time so that there is enough management to achieve the strategic corporate goals [86]. The focus is therefore on the need to identify the workforce, for example in the form of talent matrices/nine-box grids, ideally to be allocated in the organization and enriched with knowledge [87, 88]. Knowledge can be academic and practical in nature. Academic means here that additional qualifications, e.g. B. at business schools (MBA, executive programs, others) a foundation is created “off the job”, which makes it easier to master the practical challenges within the organization. In contrast, the procedure of a purely practical nature consists in fulfilling real-life tasks in the organization according to the principle of “on the job” learning [89]. The practical topics are more focused on the execution of individual steps, while the relining with the academic, e.g. B. by an MBA degree, more prepared for management tasks [90, 91]. The fact that organizations cannot be satisfied with individual measures to expand their employees’ know-how is further exacerbated by increasing technological progress. The current pressure to innovate forces organizations to constantly and, above all, to develop extremely quickly. Academic or purely practical development options can be too rigid to achieve the goals. Because of this, e-learning offers, and blogs are becoming more and more attractive. They allow employees “near the job” not only to acquire academic knowledge quickly and in a concentrated manner, but also to be at the cutting edge, as the offers are thematically precisely designed and always claim to be up to date [92–94]. “EdTech” (short for Education Technology) [95] is no longer an unknown term in the startup world—the range of innovative, digital learning services [96, 97] and learning products for organizations. Global investments in learning technologies in 2017 totaled more than 9.5 billion US dollars, as the results from the market research institute Metaari show [98–100].

2.3 Evaluation of Development Programs For years, organizations have invested time and money in improving the skills of executives and developing new executives. US organizations alone spent around

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15.5 billion US dollars on executive development programs in 2013 [101]. Colleges and universities offer a variety of courses in the field of leadership and the costs for individual leadership development offers of a top business school, such as B. London Business School, MIT, Stanford, and Harvard can quickly run to $50,000 or more per person [102]. Despite this high investment in executive training, studies show that most organizations are not sure whether their (young) executives can meet the organization’s future requirements [103, 104]. In the subjective feeling of everyone, the management training seems successful at first glance—satisfied training participants, very good ratings in the “Happy Sheets”, all good. At second glance, however, when the training becomes a topic again a little later and the inevitable question arises: What did the development measure actually bring—for the leader, for the organization? Where are the concrete results? the hoped-for answers are usually missing. Typically, this can be attributed to the lack of framework conditions in practice, which allow a pre- and post-test as well as a follow-up to be carried out with a comparison group [105]. IBM shows an example of good practice for evaluating development offers. The measurement is carried out in several stages and uses the Kirkpatrick model [106]. Figure 1 illustrates the model. Following Kirkpatrick’s four-level model, management training is evaluated on the levels of reaction (acceptance of the measure), learning (leadership skills of the participant), behavior (transfer of skills into everyday work) and results (benefit for the organization) [105, 107]. Here, level three “behavior” comes into play: Has the leadership training led to changes in behavior? Has the leader changed to approach tasks? Is she applying the new knowledge and skills she has acquired in training? [107, 108]

Fig. 1 Kirkpatrick’s four-level model. Source: Based on Witt, 2017, p. 7

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By analyzing changes in behavior after the training, organizations learn valuable information about which content-related and methodological aspects of the training had an impact and which did not. Using tests and surveys, organizations can assess whether the leader has drawn important insights from the training or whether skills need to be strengthened. A disadvantage of developing effective competencies is that skills enhanced in training are often not necessarily relevant to managerial development [109]. It is therefore important to ensure that the leadership training not only achieves the training goals, but also the organization goals and increases the impact on business operations. Organizations need to know exactly what results they want to achieve after training and record them precisely. Training goals are often broad, and organizations do not set clear benchmarks. After defining result-oriented goals, measurable reinforcement goals must be determined [108, 110, 111]. A popular approach in practice is the 3 × 4 approach, which includes the 3-time measurements weeks, months, and quarters. What does the organization want to achieve in 4 weeks, 4 months and 4 quarters? These measurable training and learning goals should be built into the training programs and discussed with the management participant. When leaders know what they are being assessed for and why it is important, they will more easily understand and implement training goals and reinforcement goals [108]. The extension of the four-level model from Kirkpatrick by a fifth level specifically for measuring the return on investment (ROI) opens up a further possibility for evaluating development measures. The so-called Philips methodology, based on the researcher’s name, uses a cost–benefit analysis to determine the value of the development measure or the specific net profit (as ROI = profit/investment) for the organization. This methodology helps organizations measure whether the money they invested in the action has produced measurable results. The question that needs to be answered in advance is what is the minimum return that I, as an organization and manager, would like to get from the development measure? [112–114] The actual lever for a benefit-oriented view of the development measure is finally provided by level 6 for measuring the value of investment—the question of the added value of the development measure [115, 116]. As part of a management training course, the added value could e.g. B. in an increased employee satisfaction and loyalty and would thus limit the (unwanted) employee turnover. Just one departure of qualified specialists and executives can quickly cost organizations five-digit sums per position and must be multiplied by the number of necessary replacements, according to the study results from a current Deloitte analysis. According to Deloitte, the departure of a qualified key worker could even threaten the very existence of the organization [117]. The study by the Federal Institute for Vocational Education and Training (BIBB) in 2008 when it came to measuring the success of training measures was a surprising result. Only about a third of the larger organizations with over 500 employees have extensive training controlling in use. In contrast, in only less than 14% of the organizations a benefit assessment of further training is carried out, which presupposes that level 5 (quantitative benefit) and 6 (qualitative benefit) of the model described above must be fulfilled [118].

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With its two extensions, the Kirkpatrick model offers a good systematic approach for organizations to measure the success or benefit of a further training measure.

3 Conclusion 3.1 Synopsis The underlying work makes it clear that organizations have a whole arsenal of freely accessible opportunities to develop their leaders and thereby contribute as much as possible to achieving the organization’s success. The design can be varied individually and adapted to the respective specifics. This is all the more important in the current times, which are mainly driven by globalization and digitization across generations. It underlines that leadership activities have become indispensable, as they can generate the knowledge and experience necessary for organizations through constant change. Theoretical measures versus effectively implemented and implemented measures make the difference and are the responsibility of the respective management.

3.2 Further Research This article offers a compiled summary of opportunities in leadership development. It would be interesting to conduct further empirical research into which measures are used how often in corporate practice and, above all, whether they are used effectively.

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Crowdfunding and Uncertain Decision Problems—Applying Shannon Entropy to Support Entrepreneurs Valerie Busse and Christine Strauss

Abstract Crowdfunding has become an interesting and widely accepted alternative to finance start-ups and projects. This paper presents an introductory motivation by making transparent recent developments in crowdfunding; furthermore, it provides insights into the decision-making of the involved crowdfunding actors in their triadic relationship. Based on empirical data collected from five in-depth expert interviews we identified several factors, which influence the behavioral decision process of an entrepreneur when making a choice on a crowdfunding platform for their crowdfunding campaign. On the example of two of those identified factors we formalize the entrepreneur’s decision process using Shannon Entropy and give a numerical example. Results are interpreted and directions for further research are given.

1 Introduction 1.1 Relevance Crowdfunding has gained an enormous growth within the last years. In this context several new platforms were established, and platform providers together with entrepreneurs and the crowd showed a tremendous engagement in the relatively new alternative funding method of crowdfunding. By analyzing the current and future (e)market development of crowdfunding it can be noticed that in literature only rudimentary and vague statistics, data, and facts about the global market volume of the crowdfunding industry and its growth can be found. This is shown in the following V. Busse (B) · C. Strauss University of Vienna, Oskar Morgenstern Platz 1, 1090 Vienna, Austria e-mail: [email protected] C. Strauss e-mail: [email protected] V. Busse Comenius University, Odbojárov 10, Bratislava, Slovakia © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_10

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example: The latest report of global crowdfunding market analysis [1] shows a crowdfunding industry volume in 2022e of 78.81 billion EUR [1]. Whereas another report on global crowdfunding market development [2] determines a global market volume of the crowdfunding industry of 27.8 billion EUR, which is about half of the market development [2].

1.2 Development and Future Expectations in Crowdfunding As a result of several sources (Technavio, Cision, Bloomberg, Statista, Bundesverband Crowdfunding, University of Cambridge, Crowdfunding Monitor 2018) we provide aggregated values for the crowdfunding market volume worldwide, the geographically segmented crowdfunding market volume, average transaction values, and number of campaigns [1–7]. The worldwide market volume of crowdfunding shows a clear upsurge (cf. Fig. 1). The compound average growth rate (CAGR) rose particularly raising in the years from 2017 to 2018. All sources assume that the CAGR will be about 18% from 2020 to 2022e. The global market segmentation shows a large increase in Asian Pacific States (APAC). The reason for this is the high expansion of crowdfunding in China (cf. Fig. 2). Besides an increase in market volumes another increase on an averaged individual level can be observed. Figure 3 shows the average transaction value per entrepreneur in the crowdfunding market over the recent seven years, i.e. since 2014. This indicator undergoes a strong increase, and is expected to continually rise in the future [1–6]. Another indicator for the development of the crowdfunding trend over time is the number of campaigns worldwide. The following Fig. 4 provides an overview of the rise in numbers of campaigns from 2017 to 2020e.

Fig. 1 Market volume of crowdfunding in billion EUR worldwide

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Market volume of crowdfunding worldwide

The Americans

EMEA (Europe, Middle East, Africa)

Asian Pacific St ates (APAC)

Fig. 2 Market volume of crowdfunding, geographical segmentation measured on basis of transaction volume worldwide (2019) in %

Average transac on value in EUR worldwide 200 180 160 140 120 100 80 60 40 20 0 2014

2015

2016

2017

2019

2020e

Fig. 3 Average transaction value per entrepreneur in the crowdfunding market in EUR

By analysing the value of raised funds of the leading crowdfunding platforms in 2019, Kickstarter stands out with a sum of raised funds of 4.06 billion EUR as the leading platform in the global market followed by Indiegogo and crowdfunder. Kickstarter with 17 million customers in the year 2019 is by far the biggest and most used service provider platform for crowdfunding. The success rate expresses the ratio of successfully funded projects versus the entire number of projects; in the case of Kickstarter projects the success rate makes up 36.98% [7]. Over three million customers have a high amount of customer loyalty, and they have used the platform more than one time. Not only the FinTech Sector is on a

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Fig. 4 Number of campaigns worldwide (in million)

giant growth but also the scientific interest in crowdfunding is rapidly growing. Nevertheless, the topic of crowdfunding is still rather unexplored. Particularly mathematical expressions ad modelling approaches of the complex decision-making structures within the three main actors in crowdfunding, i.e. the entrepreneur, the intermediary and the crowd, is still a rather unexplored field in scientific research. Thus, this paper develops a mathematical model to formalize the triadic relationship of the three generic roles (i.e. entrepreneur, intermediary and crowd). The model is fostered and completed by semi-structured interviews with five entrepreneurs, which supported the identification of decision attributes from the entrepreneurial perspective in order to provide data for a first mathematical base model. Additionally, the contribution discusses first implications on how to structure and formalize complex decision-making behavior in crowdfunding-processes in a mathematical way.

2 Theoretical and Conceptual Background 2.1 Triadic Relationship in Crowdfunding The crowdfunding process consists of three different actors as depicted in Fig. 5. The Entrepreneur who uploads the project idea, the intermediary who serves as service provider and the crowd who provides funding. Busse [8] and Peisl et al. [9] propose the different intentions of the three actors in the triadic relationship [8, 9]. According to the authors, the entrepreneur aims to generate money, feedback and the proof of competence by uploading his/her idea. The intermediary aim is to create trust, reputation, integrity and benevolence. The crowd, however, seeks to generate rewards, either socially or financially. This paper will not focus on any special type of

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Fig. 5 Triadic relationship

crowdfunding such as donation-bases, reward-based, equity-based or lending-based, by focusing on the general main factors. This paper addresses in a first step the behavioral components of the entrepreneur towards the intermediary. The goal is to identify factors which influence the entrepreneur to act towards a crowdfunding platform in terms of motivation and behavior. Subsequently, these factors will provide a base for the analysis.

2.1.1

Financing Alternatives

Raising capital is an important step to start-up and run a business. Many start-ups have to choose one or several of the many existing alternatives to finance their crucial initial phase. In the following we portray which types of funding already exist, and how crowdfunding became such a rapidly accepted and popular funding alternative for entrepreneurs in recent times. Entrepreneurs are defined as “persons who set up a business, taking on financial risks in the hope of profit” followed by definitions of other authors which characterize entrepreneurs as people who invent innovative performances, initiative takers or strategic thinkers [10]. Summarizing, the term “entrepreneur” in our paper denotes a person, who wishes to realize his/her business idea and puts it into the market. In order to do so, the entrepreneur needs a certain amount of capital to get his/her business started and to the next stage. There are several routes available to entrepreneurs to raise capital in order to fund their business, which is a crucial step. One of the most common ways is raising capital through a business angel, a person who provides a certain start-up capital for new companies. The amount of the requested start-up capital depends on the start-up, the product of the start-up, the ownership structure, and the market as well as the willingness and ability of the business angel to contribute. In return, very often the business angel gets the opportunity to contribute in terms of management and to influence important company decisions [11]. This funding form, however, does not necessarily lead to success as McKaskill [12] points out by stating that around fifty percent of business angel’s investments are in ventures, which turn out to be unsuccessful [12]. Other authors underline this argument by mentioning the high dependency on one person [13]. Another way of raising capital is through friends and family, which are often willing to support the new business. According to McKaskill [12], family and friends

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are very often highly risk averse and are aware of the relatively high probability of not getting their money back or any other reward in return [12]. However, authors such as Busse [11] claim the low accountability in terms of liquidity of family and friends [11]. Alternatively, entrepreneurs can make use of venture capital firms, which also refers to early stage and seed capital [12]. The concept of venture capital was introduced in 1946 and is known as a funding form of many successful companies including Tesla, Facebook, Starbucks, Apple, Google and many more [14]. Venture capital firms are investors, which provide seed capital to start-ups and are eager to get a high return in case the start-up is successful. Several venture capitalists experience major losses [11]. One of the newest funding forms, however, is called “crowdfunding” and became quickly a popular method during the last few years [15–17]. This form will be explained in further detail in the following subsections.

2.1.2

Decision-Making in Crowdfunding

In order to provide the basis for an analysis of the complexity and nature of the decision processes in between the three ideal–typical actors, that is, the entrepreneur, the crowd, and the platform as intermediary, and their triadic relationship, it is essential to know, that each actor has different decisions to make within the crowdfunding process. Some examples are listed below [18].: • Decisions from the viewpoint of the entrepreneur: general access to capital through four different channels such as crowdfunding, venture capital, family and friends or business angel. Subsequently, the decision of using equity-, reward-, donationor lending form. In any of these cases the entrepreneur can decide to use a crowdfunding platform, special fairs, TV-Shows or Social Media. By considering venture capital, the entrepreneur can either use venture funds or mergers and acquisitions. By choosing friends and family as the funding method, the entrepreneur has the opportunity to do this directly or indirectly through social media. When the entrepreneur is choosing a business angel, he/she has further the opportunity to go through an investment company or an entrepreneurial circle. • Decisions from the viewpoint of the crowd: the crowd has, amongst others, also several opportunities when choosing to invest in an entrepreneurial idea. First, the crowd chooses its drivers to invest. The most common driver is mostly the return driver in the form of return on equity (ROE) or gaining a special interest rate if the crowd grants a loan. Another factor is the interest in a special organization or product. The crowd could be interested in innovation, environmental advantage or social parts. By being interested in the product, the crowd can be interested in one of the four crowdfunding forms (lending, reward, donation, equity). If the crowd wants to generate social help, it can do it either with cash or by providing know how, coaching, time or any other form of tangible or intangible support. • Decisions from the viewpoint of the intermediary: the intermediary, which is the platform provider, has to decide which approach to provide (equity-, reward-,

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lending, donation or mixed-method approach). Additionally, a decision of which visual appearance and structure it might offer, the time and cost of realization as well as how to select the entrepreneur and the crowd [18].

3 Research Method The data forming the basis of our analysis was collected through in-depth interviews with five entrepreneurs from different sectors, who have used crowdfunding platforms to finance their start-up. The interviews were conducted face to face. The interviewees were selected and recruited from a circle of entrepreneurs and members of the entrepreneurial association (WU Gründungszentrum) of the Vienna University of Economics and Business. With the permission of the participants the interviews were voice-recorded. Each interview was scheduled for approximately twenty minutes per interview. In order to enable the participants to go in depth in their interviews, there was no time fixing given. All questions were established on the theoretical background of crowdfunding platforms in terms of decision-making attributes for using a platform. Semi-structured interviews were used due to several advantages. The advantage of semi-structured interviews compared to structured ones is that the interviews follow a relative loose level of standardization to enable the entrepreneur to answer in his/her own manner. Generally, semi-structured interviews are less formal and follow more an open conversation about a specific topic [19]. A further advantage is that these interviews follow a certain “road-map” in which the interviewer covers the same topics in every interview. The interviewee has therefore the possibility to answer all topics and furthermore pose new questions within the interview [19]. Two main types of interview questions were applied: open questions and closed ones [20]. The participants is able to describe specific scenarios in detail with open questions and can give personal statements, backgrounds and experience to the questioned topics. If closed questions are used within the interview, the interviewer is able to gain a specific amount of data [20]. In order to allow the researcher to choose a sample, which indicates a suitable amount of professionals in order to get the research question answered properly the so-called purposive sampling method was used [20]. In this empirical pilot study it seems necessary to interview entrepreneurs, who have at least certain experiences in crowdfunding or experience in using crowdfunding service provider platforms in order to gain useful responses. Five entrepreneurs were considered as sufficient for the sample size as this limited number allows the researcher to go into more depth [21]. Three days before conducting the interview, participants were requested to take 15 min to visit the main two crowdfunding platforms: Kickstarter.com and Indiegogo.com [22, 23]. In order to spread the given information of the interviews entrepreneur with different backgrounds were searched. To be specific different genders, years of experience a start-up business and crowdfunding campaigns were selected as depicted in Table 1.

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Table 1 Participants of qualitative analysis and their data structure Participators

Gender

Years of entrepreneurial experience

Crowdfunding project finalized

Crowdfundmg campaign pending

Intention to start a ciowdfunding campaign

P1

Male

1

No

No

Yes

P2

Male

3

Yes

No

Yes

P3

Female

2

No

Yes

Yes

P4

Male

6

Yes

No

Yes

P5

Male

4

No

Yes

Yes

Male Participant 1 (P1) has one year experience in the start-up business and focused on technical projects, the male Participant 2 (P2) has three years’ experience with entrepreneurial business in consumer fashion. Participant 3 (P3) has two years´ experience in an Austrian online wine trading company. Participant (P4) with six years’ experience is successful in online trading of perfumes. Participant (P5) has four years’ experience in financial services (FinTech). Before conducting the interviews, the interviewer signed a data privacy statement in order to guarantee anonymity of participants. The participating entrepreneurs were asked the following four questions (Q1) to (Q4) with sample answers to provide support for the interviewees: (Q1): What are the main decision drivers of entrepreneur to crowdfunding? (Guideline: Choice between business angel, venture capital, family and friends). (Q2): Did the intention to use a platform influence the active use? (Guideline: How long did you have the plan to conduct a crowdfunding campaign, and how concrete are/were these plans). (Q3): Did your environment influence you in your decision to use a certain crowdfunding platform? (Guideline: Influenced by family and friends, business environment, advertising, political environment). (Q4): Which attributes mostly affected your decision to use a specific platform by considering Kickstarter.com and Indiegogo.com? (Guideline: Platform design, cost of use, market.

3.1 Answers of Participants The answers of the participants were audio recorded and later on transcribed. The most important and most significant answers are presented as follows. Q1: What are the main decision drivers of entrepreneur to crowdfunding? By asking for reasons why participants chose the crowdfunding approach rather than other funding methods, different reasons were pointed out.

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P1 stated “There is no other possibility for me to raise capital because I have been in this entrepreneurial situation only for a short time”. Whereas P2 mentioned that “For one reason I only need a small amount of money per product; for the second reason I reach a high number of potential customers through the crowd, also I have a risk spread and a relatively simple access to the market”. The female participant P3 answered that “… because online wine trading and online crowdfunding have similarities and I am online-minded because this is the future of businesses today”. P4 stated that he already had a positive success rate in crowdfunding with one campaign being so successful that he intends to do another one. P5 answered “I chose crowdfunding as it is a part of the Fintech market, and financial services are traded on this market as well”. Q2: Did the intention to use a platform influence the active use? By asking the second question on the intention to use a platform and its influence on the actual use, P1 to P5 agreed that their intention to use a crowdfunding platform will result in an effective use. Even P1 who had not yet used a crowdfunding platform had a strong wish to use it in the near future. Whereas P2 proposes “Due to my business concept I had already a successful campaign, and that showed me that my next project with a new design and package deal will be realized by a new campaign”. Q3: Did your environment influence you in your decision to use a certain crowdfunding platform? P1 stated that “I have some friends who successfully realized crowdfunding campaigns, and this strongly influenced my own wish to raise capital via crowdfunding in the near future”. P2 mentioned that he”… saw an advertisement of a German crowdfunding platform “Starnext” with a similar business concept like mine … which inspired me to use it”. P3 said: “My parents are viniculturists, I am influenced by my family and the colleagues of my parents”. P4 stated that he was influenced by his client, a leading perfume company to use crowdfunding. P5 said that “I was impressed and therefore somehow influenced by the market position of the leading crowdfunding pages”. Q4: Which attributes mostly affected your decision to use a specific platform by considering Kickstarter.com and Indiegogo.com? P1 mentioned that “… after examining Kickstarter.com and Indiegogo.com, in my opinion providing a high degree of security as well as low cost of use are the most important attributes for me to make a decision on which platform I should use”. P2 rated factors such as “usability and the size of the market” as most important. P3 said: “Design of the platform is the first thing I noticed, as it is necessary for my products, and therefore I rate it as most important for me”. She also mentioned that “… in my brand name for the products I am using the quality feature “trusted shop” therefore trustworthiness on the webpage is also an essential factor for me”. P4 stated, that due to his experience in crowdfunding “platform dimension and reputation” as well as the “time of realization of the overall crowdfunding process” as the major decisiondriving attributes when choosing the most appropriate platform. P5 said: “For me the

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most important attribute is a perfect and a straightforward usability of the platform as well as unrestriced access for my products”.

3.2 First Results From the answers it can be concluded, that entrepreneurs prefer using crowdfunding over other common financial methods due to factors such as easy access to the market, risk spread, successfully tested,adequate for the own product. The sample of five entrepreneurs indicates that attributes such as security, low cost of use, time of realization, design, trustworthiness, platform dimension and reputation, unrestricted access as well as the market position are important for them to decide which crowdfunding platform to choose (cf. Table 2). Another result of the study refers to the stimulus to use crowdfunding as a financing alternative: all participants admit that they were influenced by their environment through friends and family, advertisements or other factors.

4 Mathematical Decision Function to Analyse the Complex Structures of the Decision Process in Crowdfunding In a next step of analysis, we use the findings and attributes described in Subsection 4.2. The following part will explain how attributes can be ranked by importance from the viewpoint of the entrepreneur. In a first step, two of the attributes, namely “time of realization” and “cost of realization”, which were identified in Q4 (cf. Table 2) will be further used in order to show how factors could be quantified and ranked based on importance and weights according to the principles of Shannon Entropy. Table 2 Questions and findings Questions

Findings

(Ql): What are the main decision drivers of entrepreneur to crowdfunding?

Easy access to market, risk split, successfully tested, adequacy to own product

(Q2): Did the intention to use a platform influence the active use?

All participatants state that the intention to use leads to an actual behavior to use

(Q3): Did your environment influence you in All participatants are influenced by the your decision to use a certain crowdfunding environment (Subjective norm TRA) platform? (Q4): Which attributes mostly affected your decision to use a specific platform by considering Kickstarter.com and Indiegogo.com?

High security, low cost of use, usability, size of the market, design, trustworthiness, platform dimension and reputation, unrestricted access

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4.1 Decision Drivers and Decision Aims Specifying the decision-making process demands a clear distinction between decision drivers and decision goal. Decision drivers are determinants for actors to make a decision towards a decision goal. For example, two main determinants of decision are in a first step “time of realization of a decision goal” and “costs of realization”.

4.2 Example of Two Decision Drivers (Determinants for Actors): Time of Realization and Costs of Realization and Mathematical Approach of Their Intensity The question of intensity and ranking of the determinants as time and costs of realization can be solved by using probability theory and Shannon Entropy.In order to express the decisions of the actors (entrepreneur, intermediary and crowd), general decision functions can be formulated: DE = Decision Entrepreneur DI = Decision Intermediary DC = Decision Crowd The aims of a decision can be various. In addition to this, determinants of decisions (decision drivers) can be added such as security, platform design, trustworthiness, platform dimension, and reputation. These determinants vary on different viewpoints, namely the viewpoint of the entrepreneur, the viewpoint of the intermediary, and the viewpoint of the crowd. x iE … x nE = determinants of decision from the viewpoint of the entrepreneur x iI … x nI = determinants of decision from the viewpoint of the intermediary x iC … x nC = determinants of decision from the viewpoint of the crowd ajE … anE = aims of decision from the viewpoint of the entrepreneur ajI … anI = aims of decision from the viewpoint of the intermediary ajC … anC = aims of decision from the viewpoint of the crowd. These decision functions depend on the individual target functions of E, I and C. DE = f DI = f DC = f

n  i=1 n  i=1 n  i=1

xi E . . . xn E + xi I . . . xn I + xiC . . . xnc +

n 

a j E . . . an E

j=1 n 

a j I . . . an I

j=1 n 

a jc . . . anc

j=1

Example of DE: The decision of the entrepreneur for a financial method such as crowdfunding a1E is a function of the aims, for x 1E and x 2E two determinants

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are defined, which are the time and the cost of realization of a funding campaign. Therefore, x 1E denotes the time of realization, and x 2E denotes the cost of realization.

4.3 Example to Explain the Intensity and Ranking of Two Decision Drivers in One Decision Aim Based on Probability Theory and Shannon Entropy In order to simplify the complex decision setting, the following example considers the first decision of the entrepreneur, namely, where the entrepreneur has the opportunity to choose between crowdfunding, venture capital, family and friends or business angel. The values are  assumptions based on actual market conditions. For the function of decision aims nj=1 a j E . . . an E , it is assumed that a j E . . . an E are the funding opportunities from the entrepreneurial perspective. Hence, a1E stands for crowdfunding, a2E for venture capital, a3E for family and friends, and a4E for the business angel alternative. nDue to simplification aspects, two determinants from the decision function i=1 x i E . . . x n E of the entrepreneur are chosen from the previous example in order to explain the complexity, specifically, the time and the cost of realization of a funding generation. Therefore, x 1E denotes time of realization, and x 2E denotes cost of realization. In order to make a decision, it is essential to consider the different preference decisions in terms of selection, evaluation and prioritization according to the multiple attribute decision making (MADM) [24]. The determination of appropriate weights for each attribute (decision driver) is one of the major efforts in MADM problems. Due to different meanings of the decision drivers, it cannot be assumed that they are weighted equally. In the following example the concept of Shannon’s Entropy is used, as it is one of the well-known methods of determining adequate weights. There exist various other methods of defining weights such as analytic hierarchy AHP method, Delphi method or weighted least square method [25]. Shannon Entropy refers to a measure of uncertainty and plays an important role in information theory [24]. Numerous scholars used Shannon Entropy in different scientific research fields and applications to model uncertainty by means of weights. It is important to identify which of the decision determinants time of realization x 1E or cost of realization x 2E is weighted higher, and therefore more important for the entrepreneur when choosing one of the four funding alternatives. Shannon Entropy is applied to the following in order to identify a ranking sequence of the determinants. H(X) =

n  i=1

 pi log2

1 pl



Legend: H denotes the Entropy of X; X denotes the Information Source, whereas x1 and x2 are variable data, which can have different information, n denotes the

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Fig. 6 Estimated probability values based on actual market conditions

numbers of symbols that information source contains, and pi stands for the probability of symbol 1. All terms pi are added:  p1 log2

1 p1



 + . . . + pn log2

  n 1 ; pi = 1 pn i=1

(sum of all probabilities equals 1) (Fig. 6). Probabilities of occurrence p1 …p2 are basic assumptions of market segmentation in the form of probabilities: crowdfunding 50%, venture capital 25%, family and friends 12,5%, and business angel 12.5%. Row z11 , a1 is explained as follows: with 100% probability interviewees are convinced that crowdfunding can be realized in a period of less than 100 days. Row z13 , a3 with a 50% probability interviewees are convinced that family and friends investments will not be realized in a time frame of less than 50 days. Both matrixes are now used to identify which of the factors, time of realization or costs of realization, is weighted as more important from the viewpoint of the entrepreneur.  H = 0.5 log2

1 0.5



 + 0.25 log2

1 0.25



 + 0.125 log2

1 0.125



 + 0.125 log2

1 0.125

= 1 * 0.5 + 2 * 0.25 + 3 * 0.125 + 3 * 0.125 = 1.75 information units Entropy of information source x 1E and x 2E . In a next step, we assume that information on the preferences is provided. p11 − p31 and p12 − p32 , values are assumed as 0.25 for each preference.



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 H(x1E ) =

     1 1 + 0.5 log2 = 0.25 p11 ∗ 0 + p21 ∗ 0 + p31 ∗ 0.5 log2 0.5 0.5  H(x2E ) = p12 + 0 + p22 ∗ 0 + p32 ∗      1 1 0.25 log2 + 0.25 log2 0.25 0.25     1 1 +0.25 log2 + 0.25 log2 = 0.5 0.25 0.25

Hence, the information gain can now be calculated as:  H − H(x1E ) = 1.75 − p11 ∗ 0 + p21 ∗ 0 + p31 ∗      1 1 0.5 log2 + 0.5 log2 = 1.5 0.5 0.5  H − H(x2E ) = 1.75 − p12 ∗ 0 + p22 ∗ 0 + p32 ∗      1 1 0.25 log2 + 0.25 log2 0.25 0.25     1 1 + 0.25 log2 = 1.5 + 0.25 log2 0.25 0.25 The maximum of information gain is 1.5 under the described assumptions and shows that from the entrepreneur‘s perspective realization time is weighted as more important than costs of realization. In a further step it would be necessary to identify more decision drivers, and give empirical evidence on the importance as well as on the weights of these drivers by collecting quantitative empirical data.

5 Conclusion and Further Research Due to a lack of analysis of decision-making structures in crowdfunding research and particularly within the triadic relationship of the players involved, several researchers state the need for a more systematic exploration of decision-making components within crowdfunding [18, 26, 27]. However, to analyse complex decisions among the actors in their different roles in a crowdfunding setting, it is essential to clarify in a first step which decisions are necessary for every single component. The contribution at hand presented recent data on the current development of crowdfunding and the dynamics between the three main actors, i.e. entrepreneur, intermediary and crowd, in their triadic relationship. As a result from five in-depth expert interviews with entrepreneurs from different backgrounds and sectors have shown that factors such as degree of security, cost of use, time of realization, usability, size of the market,

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design, trustworthiness, platform dimension and reputation, and unrestricted access but also easy access to market, risk spread, thoroughly tested mechanisms, adequacy to own product, and the environment influenced their behavioral decision to choose a certain crowdfunding platform for their campaign. With focusing of two of these factors, time and cost of realization, the Shannon Entropy was applied in order to provide an example and demonstrate how the decision determinants can be mathematically defined, measured and weighted to operationalize how decision determinants can be ranked. Further research could collect and analyze empirical data to underpin the results and possibly reveal general patterns or system-inherent interdependencies. Furthermore, the following issues could be used for further research approaches: (i) influence and ranking of other decision-drivers such as platform design and functionality, (ii) impact factor(s) of cognitive style and subconscious factors for decision-making of crowdsourcees, and (iii) attitude and behavioral components influencing the decisionmaking process from other perspectives of the triadic relationship, i.e. from the viewpoint of the intermediary and the viewpoint of crowdsourcees. our study we performed five in-depth interviews with entrepreneurs engaged in crowdfunding as a financing alternative for their start-up. As a result from the empirical work we were able to identify and derive (i) decision aims of entrepreneurs who use crowdfunding, and (ii) several of their decision drivers. We used two of those decision drivers to demonstrate in a final step on an example how Shannon Entropy can be applied to quantify decision drivers and generate their ranking, which indicates what decision drivers are considered more important over others by a decision-maker in a certain role and crowdfunding-context. Applying such a classic approach exploiting empirically collected data may provide a starting point and/or may stimulate further decision-making research in crowdfunding.

References 1. Technavio (2018). https://www.technavio.com/report/global-crowdfunding-market-analysisshare. (seen on April 20th 2019, 10 pm). 2. Cision: (2019). https://www.prnewswire.com/news-releases/the-global-crowdfunding-mar ket-was-valued-at-10-2-billion-us-in-2018-and-is-expected-to-reach-28-8-billion-us-with-acagr-of-16-by-2025---valuates-reports-300869509.html. (seen on April 20th 2019, 10 pm). 3. Bloomberg: (2019). https://www.bloomberg.com/press-releases/2019-06-26/crowdfundingmarket. (seen on April 20th 2019, 11 pm). 4. Statista: (2019). https://de.statista.com/outlook/335/100/crowdfunding/weltweit. (seen on April 20th 2019, 9 pm) 5. Bundesverband Crowdfunding: (2019). https://www.bundesverband-crowdfunding.de. (seen on April 20th 2019, 10 pm) 6. University of Cambridge: (2019). https://www.crowdfundinsider.com/2019/04/146445cambridge-centre-for-alternative-finance-publishes-4th-EURpean-alternative-finance-reporttotal-online-alternative-finance-grows-36-topping-e10-billion/ ( seen on April 20th 2019, 10 pm) 7. Galkiewicz, D., Galkiewicz, M.: An overview of European projects financed on startnext and kickstarter platforms between 2010 and mid- 2017. J. Crowdfunding Monitor (2018)

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8. Busse, V.: Crowdfunding—an empirical study on the entrepreneurial viewpoint. In: Fatos, X., Barolli, L., Gregus, M. (eds.) Advances in Intelligent Networking and Collaborative Systems, the 10th International Conference on Intelligent Networking and Collaborative Systems , Bratislava, 306–318 (2018) 9. Peisl, T., Raeside, R., Busse, V.: Predictive crowding: the role of trust in crowd selection. In: Proceedings 3E Conference Ireland, pp. 1–19 (2017) 10. Carlsson, B., Braunerhjelm, P., McKelvey, M., Olofsson, L., Persson, L., Ylinenpää, H.: The evolving domain of entrepreneurship research: are they different from independent entrepreneurs? Working Paper 12, Swedish Entrepreneurship Forum, pp.1–24 (2011) 11. Busse, F.: In: Grundlagen der betrieblichen Finanzwirtschaft. 5th edn. München, (2009) 12. McKaskill, T.: An introduction to angel investing: a guide to investing in early stage entrepreneurial ventures, Melbourne (2009) 13. Brettel, M.: Business angels in Germany: a research note. Venture Capital: An Int. J. Entrepreneurial Finance 5(3), 251–268 (2010) 14. Vinturella, J., Erickson, S.: In: Raising Entrepreneurial Capital, 2nd edn. Gainesville USA (2013) 15. Kryvinska, N., Strauss, C.: Conceptual model of business services availability vs. interoperability on collaborative IoT-enabled eBusiness platforms. In: Bessis, N. et al (eds.) Internet of Things and Inter-cooperative Computational Technologies for Collective Intelligence, Studies in Computational Intelligence, vol. 460. pp. 167–187 (2013) 16. Kryvinska, N., Strauss, C., Zinterhof, P.: Next generation service delivery network as enabler of applicable intelligence in decision and management support systems. In: Bessis, N. et al (eds.) Next Generation Data Technologies for Collective Computational Intelligence, Studies in Computational Intelligence, vol. 352, pp. 473–502 (2011) 17. Kaczor, S., Kryvinska, N.: It is all about services-fundamentals drivers and business models. J. Serv. Sci. Res. ed. The Society of Service Science 5(2), 125–154 (2013) 18. Busse V., Gregus M.: Crowdfunding—An innovative corporate finance method and its decisionmaking steps. In: Barolli, L., Nishino, H., Miwa H. (eds.). Advances in Intelligent Systems and Computing, vol. 1035 (2019) 19. Baggozzi, R., Wong, N., Abe, S., Bergami, M.: Cultural and situational contingencies and the theory of reasoned action: application to fast food restaurant consumption. J. Consum. Psychol. 9(2), (2000) 20. Park, H.: Relationships among attitudes and subjective norms: testing the theory of reasoned action across cultures. J. Commun. Stud. 51(3), 162–175 (2000) 21. Gallois, C., McCamish, M., Terry, D.: The theory of reasoned action: its application to aidspreventive behavior. In: International Series in Social Psychology, Oxford et al (1993) 22. Ogden, J.: Some problems with social cognition models: a pragmatic and conceptual analysis. J. Health Psychol. 22(4), 424–428 (2003) 23. Godin, G., Gravel, A., Eccles, M., Grimshaw, J.: Healthcare professionals’ intentions and behaviors: a systematic review of studies based on social cognitive theories. J. Implementation Sci. 3(36), 1–12 (2008) 24. Lofti, F., Fallahnejad, R.: Imprecise Shannon’s entropy and multi attribute decision making. J. Entropy 12, 53–62 (2010) 25. Saaty, T.: Decision making. In: The Analytic Hierarchy Process: Planning Setting Priorities Resource Allocation. New York (1980) 26. Kryvinska, N.: Building consistent formal specification for the service enterprise agility foundation. Soc. Serv. Sci. J. Serv. Sci. Res. Springer 4(2), 235–269 (2012) 27. Bauer, C., Mladenow, A., Strauss, C.: Fostering collaboration by location-based crowdsourcing. In: Luo, Y. (ed.) 11th International Conference on Cooperative Design, Visualization and Engineering (CDVE) 14–17 September 2014, Seattle, Lecture Notes in Computer Science (LNCS), vol. 8683, pp. 88–95. (2014)

The Impact of Electronic Services on Traditional Services Dragana Saric and Marian Mikolasik

Abstract In the last years, companies have seen that the quality of the services they provided is becoming more and more and more important. They try to reach as many clients as possible and try to improve their services. New technologies (internet, computers, smartphones) are something that companies are taking advantage of, and there has been a huge change in the way services are provided. We have less physical contact between companies and clients and even less contact by phone (already being exceeded). Companies like Amazon, Netflix, or Uber are good examples of how the way companies provide services is changing, taking advantage of new technologies, making everyone’s life easier.

1 Introduction In the past decades, we have witnessed major changes in the way services are being delivered to consumers as well as changes in services themselves. With the rapid development of technology, it was expected that this would lead to changes in everyday life of people and the way they manage their tasks. The transformation in the economy began in the middle of the twentieth century, and it became evident that manufacturing was no longer the dominant source of output creation and customers have new expectations and wishes. As firms started to shift towards creating services, the competition grew, and there was a need to create as good customer services as possible. Firms saw this shift as the opportunity to brand themselves and beat their competitors. This also had a significant impact on developing electronic services because the technology has enabled providing services of a better quality which has given firms the possibility to differentiate themselves from competitors. Services are defined as an economic activity where an D. Saric Wirtschaftsuniversität Wien (WU), Vienna, Austria M. Mikolasik (B) Faculty of Management, Comenius University in Bratislava, Bratislava, Slovakia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_11

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immaterial exchange of value occurs, and they are delivered at the point of sale; [1] the main difference between traditional services and electronic services is the usage of information and communications technology for delivering e-Services [2]. In the beginning, customers were not opened to accepting this change, but as the technology developed and the customers started to experience the improvement in service quality, e-Services started to take over traditional services and change the way the services are being delivered and consumed. They enabled access to services anytime, at any place, which was not possible with traditional services that are restricted in the market area that they can cover [3]. This appears to draw consumers because it offers them the convenience and the possibility to choose from a wider spectrum of products and enables them to make the best decisions. A large number of studies and reports have been conducted in the past years about this thesis because of its rapid growth and importance of services [4–6]. It is essential to acknowledge the changes that are occurring and to realize that the structure of the economy is changing and the consumers’ expectations are rising. Businesses are either adapting to this change or closing down, and many old-fashioned business retailers are expressing their concerns regarding cannibalizing old ways of delivery and services, which is the point that will be addressed [7]. Many firms are now starting to deliver services in addition to goods that they have been providing and add new ways of delivery—electronic channels. The importance of services is visible in the fact that most of the revenue of many firms comes from delivering services. From an economic perspective, e-Services are different from traditional services when it comes to cost structure, the rapid development of new services, the availability of transparent service feedback, the degree of outsourcing, and the improvement of services [8]. With the help of theory and practical examples, I will try to compare the way providing services has changed and the impact the electronic way of delivery had on the way people think, buy, and the quality they expect. The focus will be on the retail branch, banking, and entertainment industry, as these are industries where major changes have occurred, and many researchers have contributed to the understanding of the matter with their work, which will be used as a template for further discussion. From the economic point of view, the additional cost that has been caused as well as cost savings will be discussed and the impact it had on firms and businesses themselves. The work will be based on the studies conducted by now and the analysis of the market changes. This will be done with the help of real examples, the comparison of revenue and cost structure of the firms, the change in service and product offerings in time that occurred, and analysis of the changes in the market which firms have experienced. The firms which will be discussed are Amazon as one of the biggest online retailers, Netflix-representing the entertainment industry, Wal-mart as a traditional retailer, and Uber as a new means of transporting people.

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2 Traditional Services 2.1 Shift in the Economy: The Importance of Services As firms started to realize they could fulfill their customers’ needs better and raise their satisfaction by offering different kinds of services, they started to shift towards providing more services [9]. The transformation included both changes in what is produced and how it is produced [10]. As Zeithaml et al. claim, shifts in technology, consumer markets, and labor markets had led to changes in how it is produced and in the way services are being delivered. The time needed for production has decreased, and with the new ways and channels, the delivery time has also reduced significantly. Firms realized they could achieve the better identification of the product in the mind of consumers by changing the consumption and offering services together with goods. This enabled firms to sell both goods and services as a bundle and make additional profit. The increase in income and demand changes had led to steady growth of freestanding consumer services such as hotels, restaurants, travels, etc. The importance of services is visible in the fact that most of the revenue of many firms comes from delivering services. For example, the IBM Canada project has 70,000 service encounters daily, and PSC Health System, a pharmacy benefits provider more than 1 million daily. IBM generates more than $30 billion in revenue, and most of this profit is from service offerings [6]. In an economy, services are defined as an economic activity where an immaterial exchange of value occurs [1]. In this transaction, no physical goods are exchanged, the value is intangible, and it is consumed at the point of sale. Four main characteristics of services as suggested by Zeithaml et al. (1985) are intangibility, inseparability, heterogeneity, and perishability. Services cannot be stored, which means they cannot be saved and consumed later. Services are perishable in the ways that they have to be used in a particular period of time, and if they are not used then, they are lost and cannot be stored for later. This represents a loss for the service provider and can be seen as lost profit. Additionally, services cannot be reused, once they are delivered, they vanish entirely, which means if you have not used services once it has been delivered there is no way for customer or provider to use that exact same service again. Another characteristic of services is inseparability, which means that services are delivered and consumed on the point of sale. Both service provider and customer have to be present at the same time because there is no physical good that can be produced and stored for later for the consumer [11]. Services are heterogeneous and variable, which is notable in the fact that once delivered, service cannot be repeated, as the circumstances are different, even if the consumer asks for the same service from the same provider. Some of the examples of services are cleaning, banking, shopping, hair styling, education, medical care, or transportation. In order to deliver services, it is important to observe six factors: • The service provider (workers and managers)

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• Equipment used to provide the service (e.g., cash registers, vehicles, computer and technology systems) • Customer contact • Service consumer • Physical facilities (e.g., buildings, parking, waiting rooms) • Other customers at the service delivery location activities. The focus of this work will mostly be at the equipment used to provide the services because this factor makes the most difference between traditional and electronic delivery of services.

2.2 Internal Communication Tools Traditional services are the services delivered to the customer without the help of information and communication technologies or with little interference of technology, and they are characterized as low tech and high face-to-face contact [6]. In traditional services, most of the encounters were face to face in an actual service setting without much of interference of technology. Most of the time the only way technology was included in service delivery was if the service was delivered over the phone, which is today already considered as the old-fashioned way. Each encounter is an opportunity for a firm to sell itself, to reinforce its offerings, and to satisfy the customer, which leads to stronger consumer-based and loyal customers, which are the biggest advantage one firm can develop. High-touch service means that the customer is highly involved in the sales process, and it has to be guided via human involvement. This includes negotiations, meetings, and the presence of the customer. Even though in traditional services technology was present, as for example, telecommunications, most of the services were delivered with the presence of the customer and with their involvement [12, 13]. With the rapid development of the Internet, this has changed, and now we have the opportunity to get service delivered without our presence, even at the time and place consumer chooses. Sometimes services are simple one time encounter with the firm, as buying groceries at the supermarket, and sometimes the services are made from a sequence of encounters in order to satisfy consumer needs [6]. In most of the industries, for example, healthcare, retail, travel, education, and in business to business services such as consulting, maintenance, administrative work, consumer services have been delivered by human contact, but even in these industries, technology is now taking over, and delivery of services is changing [8].

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2.3 Service Quality In most services, quality occurs during service delivery, usually in an interaction between the customer and contact personnel of the service firm [14].

Service quality is one of the main points that differentiate a firm from competitors, and it is very important to understand what service quality is for customers and what they hold as valuable [15]. There are many definitions and dimensions of service quality. Seven service attributes are used to define service quality—security, consistency, attitude, completeness, condition, availability, and training of service providers [16]. Lehtinen and Lehtinen (1982) defines service quality dimensions as physical quality, interactive quality, and corporate quality. Corporate quality can be seen as the image that the service provider portrays, communication between the service provider and the consumer is interactive quality, and the tangible appearance of the service is considered as physical quality. One of the advanced models to define service quality is SERVQUAL, which defines tangibles, reliability, responsiveness, assurance, and empathy as the five most important dimensions [14]. Leading companies are focused on improving service quality, and they use it to differentiate themselves, to increase productivity, to earn customers’ loyalty, or to fan positive word-of-mouth advertising. Competitors can seek to increase their performance with the help of quality in two ways described below [17]. In the short run, they can increase profit by offering premium prices. Frank Perdue, the well-known chicken grower, said: “Customers will go out their way to buy a superior product and you can charge them a toll for the trip.” [17, p. 9]. The truth of these words we can see in the case of PIMS businesses, which ranked the top third on relative quality, and sold their product or services, on average, at a price 5–6% higher relative to their competitors also stated by Zeithaml et al. Quality and excellence pay off because it creates customers that are loyal and will use services again. Stew Leonard, a food store retailer, said: “We should never let a customer leave the store unhappy because we look at each customer as a potential $50,000 asset. An average customer spends $100 a week on food shopping. That is more than $5000 a year, and more than $50,000 over ten years. Customer service is big business if you look at the long run picture.” [17, p. 10]. Service quality is much harder to evaluate than goods quality. Customer does not only value the outcome of the service but it puts a great deal of importance on the way service is delivered, the process of service delivery, are the workers friendly, responsive, helpful etc. and therefore service quality can be defined as “the extent of discrepancy between customers’ expectations or desires and their perceptions” [17]. Customers’ expectations are being shaped under the influence of several factors defined by Zeithaml et al. (1990). Word-of-mouth advertising is one of them because customers shape their expectations under the influence of what they have heard about a particular service provider from their friends, family, neighbors, etc. Past experiences are also important, as well as the personal needs of the customer, his

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individual characteristics, and circumstances that he is experiencing at the moment of need. Many firms lay a great deal of meaning to ways of external communications, advertising their services, which is important in order to make customers aware of their existence and the services they offer. This also forms expectations by customers because they require service quality as it has been advertised [18]. What customers find important is responsiveness—the willingness to help the customer and provide prompt service, competence—is the provider competent and has skills to provide service, reliability—possibility to perform service accurately and dependably, credibility, security, approachability and ease of contact, communication, and understanding of the customer [14]. Most of these dimensions can be improved with the help of technology, the fact which has led to such a rapid and significant growth of usage of technology in every day’s life. For the retailer, this brings the greater possibility to make a profit and increase its revenue. In Germany, we have witnessed a steady growth of revenue of the IT services industry, and it is predicted that it will continue to grow in next few years (Fig. 1).

Fig. 1 Projected revenue of IT services in Germany

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3 Electronic Services 3.1 Definition of Electronic Services E-services can be defined as “deeds, effort or performances, whose delivery is mediated by information technology, including the web, information kiosk, and mobile devices. Such e-service includes the service element of e-tailing, customer support and service, and service delivery” [3, p. 341]. They are interactive software-based information systems, and information and communication technology is used for their delivery, which opens the possibility to increase customer satisfaction, increase efficiency and improve customer-provider relations [19]. “Providing an alternative delivery channel, here electronic, can generate competitive advantage which can be seen as an increase of customer base and improvement of customer loyalty to the firm” [20, p. 3]. Other studies have shown that retailers are adding an online channel to traditional one risk possible cannibalization in sales of one channel which will be discussed later in this work [21]. Even now, but especially at the beginning, it was very hard for consumers to shift towards e-Services, primarily because they had no trust in delivering services this way. The perceived risk they experience has an impact on the acceptance of e-Services, and some claim it is dependent on the importance of the situation [8]. However, now more and more people are shifting toward using technology, and we can see a significant increase in total worldwide Internet users from the year 2005 to the year 2016 [22]. Access to the Internet enables collecting and exchanging more information about the content of consumer’s interest, and it gives them access to content that might not be available in brick-and-mortar stores [23]. This gives an opportunity to the service providers to gain more customers and increase their revenue. On the other hand, other authors argue that digital networks can have a negative impact on media companies economically because the copies of media content can be obtained illegally for free [24]. For example, in the United States, in 2005 only, Hollywood studios lost $1.3 billion due to consumers’ illegally obtaining media copies and Internet piracy [25].

3.2 Service Quality Same as electronic services can be distinguished from services, e-service quality can be distinguished from traditional service quality. As already mentioned, e-services have developed because of the need to have better delivery of services and because of the need to differentiate from the competitors. Because of the difference between the two, measuring the quality is also different. E-Services are different from traditional services when it comes to cost structure, the rapid development of new services, the availability of transparent service feedback, the degree of outsourcing, and the improvement of services [8].

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When it comes to electronic services, they are provided through web portals and electronic channels, which is the reason why providers focus on developing userfriendly websites that will attract customers. A successful website should be easy to use, have useful information, be attractive, provide a search button on the web page itself, display the site and provide links to other sites that can be useful [26]. There are many more things that electronic service providers should be aware of as for example, ease of navigation, security, product delivery, personalization, and communication over the website [26]. These are all the factors that have an impact on the user’s perception of the firm and service quality. As there is a SERVQUAL model for traditional services in 2002, Zeithaml et al. developed an e-SERVQUAL model for measuring electronic service quality. The dimensions that it holds as valuable and important are divided into two parts. First, there is a core e-service quality scale with four dimensions: efficiency, reliability, fulfillment, and privacy and recovery e-service quality scale with dimensions such as responsiveness, compensation, and contact [17]. The user’s major positive themes in the online environment are flexibility, convenience, enjoyment, efficiency, speed, responsiveness, etc. The reason why online service has become so important for the customers is the fact that is much easier for them to find the product or the service that they need, compare the prices, compare the quality and technical features as well as rate the products [6]. Technology has enabled to increase satisfaction for customers but also for employees, and Bitner et al. [6] defined this with the help of a model created by Bitner et al. [27], and they claim that “technology can be used by contact employees to improve the efficiency and effectiveness of service encounters by enabling customization, improving service recovery and spontaneously delighting customers and it can be used independently by customers to improve efficiency and effectiveness of their own service encounter experience also by enabling customization, improving service recovery and providing spontaneous delight.”

3.3 The Long Tail The Long Tail is a term presented by Chris Anderson, and he argued that “products low in sale volume or with low demand can collectively make up a market share that can even exceed the relatively few current bestsellers but only if the distribution channel is large enough” [28 p. 63] (Fig. 2). As retail stores are physically restricted and can display only a particular number of products, they opt for displaying bestsellers as they want to maximize revenue [29]. They are also restricted in the space they can cover as they can serve only a smaller area for a typical movie theater and even less than that for music and bookstores [28]. The Pareto principle, also known as the 80/20 Rule, states that around 20% of products in the market often generate a large proportion of sales, e.g., 80%. Therefore, the rule is there to help managers decide which factors or products are most important to generate the most revenue and receive the most attention. However, in the digital

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Fig. 2 The long tail title distribution [28]

content business, this rule does not apply, and Anderson states that now with niche products, we can talk about a 98% rule. This rule predicts that 98% of the items for sale in large commerce sites like Amazon or Netflix will be sold each quarter, at least a handful of times [28]. The 98% rule almost turned out to be universal in digital industries; Netflix estimated that 98% of its DVDs rented at least once a quarter, Apple said that every one of their iTunes tracks sold at least once, and independent academic research suggested that 98% of Amazon’s top 100,000 books sold at least once a quarter, too [28]. The Long Tail phenomena were notable even before Anderson defined it, as Frank Urbanowski, Director of MIT Press, stated that in 1999 the accessibility to niche products or backlist titles through Internet led to a 12% increase in sales of these titles, even if the increase in overall book sales was flat [30]. Two main explanations can be derived in order to define The Long Tail [31]. Firstly, we can examine the supply side. Internet supply channels can carry and deliver much more products than the traditional retailer. The niche products in online stores represent just bits in the database, and the costs of storing them are minimal if not nothing [28]. Physical stores are limited with self-space and the costs of storing the items are much larger than on the Internet. It is estimated that a CD copy needs to sell at least four copies in order to be worth displaying- these are the cost of half an inch of self-space [28]. The online bookstores, for example, allow retailers to offer over 2 million book titles, whereas traditional books store can carry between 40,000 and 100,000 titles, which are incomparably lower [31]. Next, we can observe the demand side, as the second important factor defined by Anderson and extended by Brynjolfsson et al. [32]. The increased demand for

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niche products can be seen as the consequence of increased convenience and lower cost. IT technology enables customers to search through titles and products much faster using discovery tools and recommendation systems, as opposed to the retail store where many shoppers do not search deeply because of the inconvenience of searching for a product in a store with thousands of items. There are three forces behind the Long Tail [28]. First, there is democratizing the tools of production, which is represented through possibility, with the help of technology, to do everything professionals can do. Now, everyone with access to the Internet and technology can make content and upload it online. This leads to the growth of content, and this increase in available goods extends Tail to the right. The second force is cutting costs of consumption by democratizing distribution. The Internet has lowered costs of reaching customers, even for physical goods, and it is much cheaper to reach more people. The third and last force is connecting supply and demand by connecting consumers with newly available goods and increasing the demand down the Tail. The use of technology enabled to lower “search costs” of finding niche content. Search costs are seen as all costs that occur for the consumer while trying to find what he wants [28]. This includes both monetary costs, for example, paying the higher price for a product because there was no possibility to find a cheaper one, and non-monetary costs as wasted time, confusion, and wrong turns. All this combined resulted in increasing demand for niches and flattening the curve, shifting its center to the right. In conclusion, it can be derived that The Long Tail is one of the important concepts in understanding the changes that have occurred and the difference between the delivery of electronic and delivery of traditional services. It is also important because it contributes to the understanding of the economic aspect of these changes, and it helps to evaluate the consequences that we have witnessed in the economy.

4 Examples in the Industries 4.1 Traditional Banking Service Versus E-Banking There are some fundamental differences between traditional and e-Banking. In this part, it will be discussed how traditional and e-banking services are delivered and their advantages and disadvantages. Banking services are going through major changes, and the main force behind all these changes is technology, which enables creating new products, delivering services faster and more convenient for the user [33]. With the expansion of the Internet and computer usage, electronic banking has become an ideal way for banks to meet customers’ expectations. Online banking can be seen as Internet portal which enables fulfilling different banking actions e.g., transaction, payments, etc. [34]. In ebanking, as in many kind of e-services, ease of use, delivery speed, control, reliability, security, costs, etc. have the crucial role [26]. Financial institutions that offer services

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online are perceived as leaders in technology implementation by the customers, and they provide better response to the market, which leads to enjoying better brand image which institutions build [35]. The main positive traits of internet banking are cost savings and improved operational efficiency, additional revenues from transaction and user fees for online bill payment, e-commerce portal offerings, and cash management [36]. It also offers opportunities to acquire new customers as well as offer better services to the old ones. The costs are lower than in the traditional banking service and include the costs of outsourced e-banking, the cost of one-time implementation or set-up fees, and ongoing monthly fees, which are calculated based on the total asset size, the total number of customers, and a number of e-banking users [36]. Usually, these fees are paid by customers. The costs that financial institutions can expect when setting electronic banking include the purchase of hardware and software, website development, quality assurance testing, user interface development, Web hosting services and ongoing operation expenses [36]. An estimated cost of providing the routine business of a full-service branch in the USA was $1.07 per transaction, in comparison to 54 cents for telephone banking, 27 cents for ATM banking, and only 15 cents for internet banking [33]. The share of individuals using e-banking is increasing every year, and expectedly it is higher among the individuals that have used the Internet in the last three months [37] (Fig. 3).

Fig. 3 Online banking penetration in EU [37]

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Some of the additional features that internet banking offers and that attract the attention of the user are the provision of interactive loan calculators, exchange rate converters, mortgage calculators on the websites, etc. One study on consumer acceptance of Internet banking obtained results that the perceived ease of use, security and privacy, the amount of information available on the platform, perceived enjoyment, and perceived usefulness are the main factors consumers find important [34]. Perceived usefulness and value includes transaction speed, user-friendliness, accuracy, security, user experience, user involvement, and convenience [38]. This kind of service delivery saves a lot of delivery time. It has been shown that user would rather opt for self-service in order to save time than getting served by professionals if it meant slower delivery time [39]. With e-banking, delivery time is brought to a minimum because it does not require a user to travel to the bank, wait in the line, and spent time being served by the worker, and it does not require the physical presence of the consumer. For people who often travel abroad, it enables better control of their finances and gives them a possibility to manage their money transfer and people who find it more convenient to manage their accounts from home, as it is available 24/7 [40]. Research conducted by Marenzi et al. has shown that online customers are more likely to become captive users of multiple services as a result of the “stickiness value” of the institution’s e-banking website. Customers using Internet banking, especially electronic bill payment, are more likely to retain their bank customers [36]. When it comes to cost, it is cost-saving both for the bank and for the consumers [6]. For banks, it means eliminating costs of staff, facilities and administration and decline in marketing costs and for consumers, it eliminates traveling cost, and some possible bank charges that may occur for certain transactions or when user pay bills electronically—directly from their account to the merchant and it also helps to save money on postal charges [41]. It offers institutions the opportunity to conduct surveys among customers that can measure customers’ satisfaction and bank’s performance and respond quickly and effectively to consumers’ needs [26]. The main disadvantages are the lack of personal contact because the user does everything online using electronic channels and security issues [40]. Also, what can be viewed as a problem is the socioeconomically disadvantaged consumer would less likely be ready to pay a monthly fee to subscribe to internet service and would be less likely to have a home computer [42]. The authentication and capsulation of private data are critical, and this is the main risk that users bear when they opt for internet banking [38]. The adoption of e-banking may be affected by security and privacy issues, and for this way of service delivery to be successful, banks have to provide privacy methods, such as unique identifiers, for instance, a password, important date, name, or a few minutes of inactivity automatically logs the user out. When it comes to cost, Internet banking services are typically profitable for banks, and the main reason for this is increased customer retention, improved cross-selling opportunities, reduced transaction costs [36]. Traditional banking is based on human contact and the physical presence of customers by providing services [38]. In the conventional banking system, a customer

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can open any bank account in any bank and manage his money transactions, and as one of the primary traditional services encounters traits, he can meet with the bank manager and have one-on-one, face-to-face consulting. The main advantage of this way of banking, as in all traditional services, is face-to-face contact and the possibility to talk with your banker and have a better understanding and insight in managing your money. As already mentioned, there are many security problems that occur when it comes to electronic banking that can be avoided in traditional banking, which can be seen as one of the main advantages of the traditional way of delivery of banking services. It can be unsafe for the customer to share confidential information online, especially over public and open networks. When it comes to traditional services, this is not a problem, and it is safer for the user [43]. When it comes to the disadvantages of traditional banking- it is time-consuming because it requires the user to be physically present at every service, which means that user has to come to the bank in order to fulfill his task. The consumer has also to pay attention to the working hours of the institution and is unable to manage something when banks are closed. It is also cost consuming for the consumer if we consider the costs of traveling to the bank, as well as for banks because in order to provide good service quality, they have to be able to provide quick and effective service and be always available. All of this requires high operating and fixed costs, and the quality of service can be affected because the employees and clerical staff of the bank can attend only a few customers at the same time. There is also a problem for users abroad that are unable to pay attention and manage their finances. Even though all of these disadvantages are present, there are still users that highly value physical contact and consulting face-to-face with professionals and that do not have trust in electronic service providers.

4.2 Traditional Shopping Service Versus Online Shopping The shopping industry is one of the sectors that have experienced the most of the changes that have occurred with technology development. Traditional shopping can be replaced by online shopping to the extent where it is possible to order groceries online and have them delivered to your house at the time you select [6]. There are some basic types of traditional retail stores like department store which offers a broad type of goods in one place, and customers can get almost every product they aspire. Discount stores also offer a wide range of products but at a discount rate and the quality can be a little inferior in comparison to the department store. Supermarkets are the type of retail store which sells food products and household items. It offers a wider range of products than the small grocery stores. Malls are many retail stores operating in one place, and it consists of several retail outlets, each selling its own merchandise. With traditional shopping, the customer has no or minimal contact with technology, and in some ways, this can be very limiting for the buyer. The customer can

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only buy products that are on display in the store and that are available to him at that particular time in that particular store, which is one of the main problems of traditional shopping. Usually, if you are looking for a particular item, you will find only limited choices of it. Having a limitation of shelf space, brick and mortar shops simply cannot afford to provide large varieties of products, and for them, it makes economic sense to fill the limited space on their shelves with items that sell most [28]. These products may not necessarily be the best, but probably the ones that are marketed as the best and the most popular [29]. The other problem related to this matter is if the retailer increases the number of products carried in the store the costs of carrying are increasing due to increased shipping costs, inventory costs, and shelf space costs [44]. The customer does not have all the information about the other products and possible replacements because, for example, there are not in the store. When it comes to costs, there is a possibility that the product customer needs costs less at some other store, but the buyer has no choice but to buy it at a higher price in this store. It also includes costs of traveling to the store, and it is not available at any time because the customer has to find free time and physically go to the shop. This is a particularly important problem when it comes to the people that live in small cities or rural areas, and there is a great chance that there is no store that they need and therefore no product and the choice and the variety of product are highly dependent on the place where the buyer lives [19]. As there are disadvantages there are also many advantages. One of them is a possibility to see the product, touch and feel it and see the quality of the productcustomer can use all his senses [3]. Even though one of the disadvantages is the unavailability of products anytime, anywhere, still if a customer needs the product right away he can go and buy it and does not have to wait until the product is delivered. As in most of the traditional services, this way of delivering services requires social contact and face-to-face communication between people. Also, the buyer has the opportunity to ask sellers questions about the product and get the better understanding about it. Returning the product can also be easier it only requires a customer to go shopping as opposed to online shopping where he has to contact seller, go to the post office and sent the product back, and then wait for the money return [45]. Online shopping, on the other hand, allows customers to purchase items or services online, directly from a seller using a web browser. This enables purchase without the need to physically go to the store and wait in the line. Customers have to use some of the methods of payment that are accepted, like PayPal, credit card or debit card. When the transaction is completed, if it is a physical product e-retailer ships the product to the buyer, if it is about a digital product, the retailer sends it over the Internet. Three main factors that drive customers to online purchasing based on Macquarie Bank [46] are: • Price—Price is very transparent in an online world, and with the use of the internet customers are able to quickly and easily compare prices. Some websites

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as Shopbot or Static Ice collect prices from different retailers and display them from the lowest to the highest depending on customers’ wishes. • The convenience of the shopping experience—consumers find this type of shopping convenient because they are able to do all of their research and order goods and get them delivered to their house without the need for them to leave their home. • The range of products available online—the product offered online is much larger as one in the traditional stores because online retailers are not constricted by physical space, and they can display all products they have. Plus, there are certain products that are unavailable offline as some media and entertainment content. The process of ordering and buying online is relatively simple. First, the customer finds a product of interest directly on the retailer’s site or by using shopping search engines. Most of the retailers use shopping cart software that enables users to store their products and adjust quantities before checkout. In the checkout process, payment and delivery information is collected. Often buyer receives an email confirming their purchase and the process is finished [6]. Many of the online stores offer the possibility to create a permanent online account so that customers do not have to enter its information by every purchase. Online shopping offers a broader selection and more information about the product, which is very attractive to the customers. It is required from the seller to write the description of the product and in some cases even a how-to-use guide. Buyers have a better understanding of the product or service, and they have a greater variety of products to choose from and select the best one, the cheapest one, etc. It is possible to personalize and customize the shopping experience, which is very attractive to the users. Many sites include a review section where users can rate the item or the service and write their own experience [6]. What users find important when it comes to websites is the ease of use and userfriendliness, and in order to create an advantage, an online retailer has to be able to provide the good speed of the website, easy to use and understandable site, and it has to provide good security measures [8]. Online stores are available 24 h a day, which makes them very convenient for the user if we take into account that the average user has internet access a whole day [6]. It does not require the buyer to travel to the shop, pay attention to opening hours, and spend their time shopping. Although the costs of the product are typically lower because of the broader offer, the shipping cost can be very high. Usually, they are not listed up until the last step of the purchase, which can be an issue for the buyer because he does not know the full price of the product until the checkout. When it comes to the costs for the retailer setting up an online business is much cheaper than the traditional store. It excludes the costs for the rent; there are no other utility costs related to the store, and it is often required to hire much less working force as it would normally be. The costs that are related to the online business include the cost of the web hosting and technical support, the retailer is required to pay for its domain name usage and may pay someone to develop their website and e-commerce platform, which can be expensive but it still cheaper than opening a real store.

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E-commerce estimated share in the total value of United States manufacturing shipments was around 18% in the year 2000, and in the year 2014, it grew to 60.9% (Bureau). Based on statistics done in Canada, cross-border shopping reduces money circulating in local economy by up to 32% and the higher the volume of online purchasing a consumer does, the more likely is that they purchase with chains versus local business [47]. According to the Commerce Department data, e-commerce doubled its share of the retail pie from the end of 2009 to the middle of 2016, and while overall sales have risen a cumulative 31%, department store sales have plunged 17%. On top of that, Howard Davidowitz, the chairman of Davidowitz & Associates Inc., claims that half the 1100 US regional malls will close over the next decade [48]. As shown in the graph Fig. 4, e-commerce sales in the United States have been growing and are expected to grow in the next years [49]. In the economic view, e-commerce is expected to have an impact on traditional store business. In combination with other factors such as stagnating retail sales, modesty growing space and an increase in fix costs, traditional retailers are forced to invest and increase their cost in order to compete with an online business. All of this combined is making retailers aware that their margins are likely to decrease in the future. The most affected group is and will be small local businesses as they already see consequences. The most affected stores are toys, electronics and books, and clothing. The customers are more opposed to buying groceries and luxury goods online, but still,

Fig. 4 Retail e-commerce sales in the US from 2015 to 2021

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Fig. 5 Retail revenue [50]

even in these industries, there have been changes in the way customers shop. In order to preserve their position, traditional stores are now focusing more on branding and creating a special character among the mix of the store. They believe that customers will feel that they are in a special place with the best products and that they are going to experience something they cannot get online. One study has shown that turnover and profit margin of the retailers has significantly decreased in the past few years and therefore retail stores are now more engaged in services related to customer satisfaction and lately they have started to deliver services of their products at the doorstep of their customers. In the graph on Fig. 5 we can see that from 2010 to 2015 Amazon’s revenue, one of the biggest e-commerce representatives, grow almost 200%, while Walmart, one of the biggest traditional store representatives, revenue grow only around 25% [50].

4.2.1

Amazon.com Inc

When we talk about e-commerce, one of the main representatives is Amazon, which is a great example for discussion because it offers many e-services, and up until now, it is one of the e-retailers which had the largest impact on traditional businesses. Amazon is the largest Internet-based retailer based on total sales and market capitalization. It was founded in 1994, and it started as an online bookstore that later started to sell DVDs, CDs, electronics, clothes, food, toys, music, etc. It also produces consumer electronics—Kindle, e-readers, Fire tablets, Fire TV, and Echo.

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They focus on providing high value using technology in order to offer low-cost solutions to the customers. Offering “lowest possible prices”, sometimes free shipping, selling e-reader Kindle at the lowest price among competitors have led to Amazon being the cost leader in the e-commerce branch and customers choosing this way of purchase. Amazon had a strategy that included steady growth and focusing on longterm success, and this had, for a consequence, lower profit in the first five years. The real growth it had experienced in the year 2002 and later when it started to dominate the market. Amazon is one of the most prominent representatives of online shopping platforms. It offers customers added value, which is represented through the possibility to search for products online, compare product prices, choose the best one and have it delivered to the customer’s home address. It also offers the possibility of Amazon Prime, where customers pay the membership fee and they enjoy the faster delivery time, no delivery cost and the possibility to stream and watch movies and music for free. The revenue of Amazon is steadily growing as shown in the graphic Fig. 6 [51]. In addition to offering its own products, Amazon derives around 40% of its sales from third-party sellers who sell their products over this platform [52]. Amazon was and still is focusing on selling books, especially e-books. The first time e-books outsold the printed books was in 2011 when Amazon sold 105 copies of e-books for every 100 copies of printed books, including books without Kindle version and excluding free e-books [53]. At this point, Amazon has been selling print

Fig. 6 Net sales revenues of Amazon [51]

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books for more than 15 years and e-books for only four years. In 2011 when this trend started, the e-book sales at the beginning of the year were $69 million, which is an increase of 146% from the year before, and sales of adult hardcover books grew 6%, while paperback sales decreased nearly 8% [53]. Still, Amazon argues that e-books will not cannibalize sales of printed versions but rather represent incremental sales. Some consumers have strong preferences when it comes to the distribution channel and between physical and digital products. Jeff Bezos, CEO of Amazon, commented on the matter: “When people buy Kindle, they actually continue to buy the same number of physical books going forward as they did before they owned a Kindle. And then incrementally they buy about 1.6–1.7 electronic books, Kindle books, for every physical book that they buy” [54]. But still, authors worry that sales of the printed versions will suffer because of the electronic channels that provide e-versions of the books, and they argue that book buyers do not buy format but the content [55]. A study was done by Corintas et al. [56] suggest that possibility to offer delivery through the online channel can actually lead to increase in profitability rather than cannibalization and complement traditional channel by enabling firms to retain some of the customers of the items withdrawn from traditional stores. Retailers should offer only popular products in stores and less popular online, which leads to an increase in customers welfare [23]. The bookstore sales in the United States are steadily decreasing from the year 2007, and it is even more significant when we take into account that book sales were increasing 15 years prior to 2007. (Bureau) Barnes & Noble, one of the biggest U.S. brick and mortar bookstores, has been experiencing a significant revenue decrease from 2012 when the revenue was $5.39 billion, and in 2016 it was reported that revenue decreased to $4.16 billion [57]. This decreasing trend is estimated to continue [58]. The study conducted by Nielsen Scarborough illustrated the number of people who shopped at Barnes & Noble from spring 2008 to spring 2016 and the results showed the decrease in the customer number from 67.88 million as of 2008 to 52.57 million in spring 2016. (Scarborough) All this resulted in closing down many bookstores which can be seen in a graph Fig. 7. (IBISWorld) The forecast for 2018 also shows that this trend is estimated to continue. In order to minimize the effect on sales, some publishers delay releasing the ebooks couple of weeks after the printed book is published. Some studies have shown that this has no impact on sales of hardcover books but it just minimizes the sales of e-books once they are released [55]. One of the reasons why e-books may not affect sales of hardcover books is the fact that there are customers that highly value the experience of reading a book and having a real copy in their collection and the problem that may occur with this strategy of delaying e-book release or not releasing them at all is a possibility that customers that wanted to read the book, but did not want to buy the hardcover copy, will be denied possibility to read it [55].

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Fig. 7 Number of bookstores in the US [59]

If we observe the United States, as one of the biggest markets, we can see that overall the printed books had higher sales than electronic books, but as shown in the graphic Fig. 8, it is expected that in 2017 the e-books will surpass hardcover ones. In 2012 hardcover book sales were $11.9 billion and were expected to fall down to $7.9 billion in 2017, and eBooks excluding education publications were expected to reach $8.2 billion [60].

4.2.2

Wal-Mart Stores, Inc

In order to obtain a better understanding of the difference between e-commerce and traditional commerce, the comparison between Amazon and Walmart will be made, as Walmart is one of the biggest traditional retailers. Walmart is an American retail chain that operates as hypermarkets, grocery stores, and discount department stores. As of January 31, 2017, Walmart had a total of 11,695 units, 4672 in the United States and 6363 units internationally [61]. Although Walmart does offer a possibility of online shopping, it is still not even close to competing with its retail stores, considering the fact that only 3% of its annual revenue comes from online shopping [61]. And even with this possibility, Walmart encourages its customers when ordering online to collect their orders at physical stores, at service areas designed for this purpose. This can lower the convenience of online shopping because, as already mentioned, one of the biggest reasons why

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Fig. 8 eBook sales against printed books sales [60]

consumers choose online shopping is the home delivery of the products and no need for them to go to the retail store [41]. Walmart is encouraging Omni-channel model, which is defined as “the synergic management of the numerous available channels and customer touchpoints, in such a way that the customer experience across channels and the performance over channels are optimized” [62, p. 176]. Many customers use both physical and online channels when making a purchasing decision, and they combine the information they obtain using one channel and make a purchase using another channel [62]. Some authors claim that this strategy is the winning one for Walmart to beat the competitors and to differentiate itself because although online purchasing is very important in today’s society, brick-and-mortar retail still counts for over 90% of retail revenue [61]. On the other hand, some claim that one of the reasons Amazon may have the advantage over Walmart is the use of the algorithmic approach to present particular products to its customers and the usage of real-time data to fuel dynamic pricing [63]. Walmart has yet to develop a strong online platform that can collect a large volume of quality consumer data that can be used in decision making. Studies have shown that customers highly value the price of the product, and in most cases, they will choose the cheaper product, not taking into consideration the delivery channel [64]. According to William Blair & Co.’s study, there is a significant difference between Amazon and Walmart prices. Amazon processes are estimated to be roughly 9% lower than Walmart’s when sales taxes are excluded for Amazon and shipping is calculated for both. This represents one of the major reasons why online shopping has gained importance in the last years. In order to gain a competitive

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Fig. 9 Walmart’s net sales [66]

advantage over Amazon, as of February 2017, Walmart offers free two-day shipping on more than 2 million items without a membership program [65]. One of the main problems of physical retail stores is space restriction. (Anderson 2006) Walmart is unable to display all of the products that can be of customer’s interest, so, like many retailers, it opts for the most popular and looking for at the time. It is hard to satisfy all customers because of this restriction, but online retail offers the possibility of surpassing this obstacle, as it offers “endless” storage space. Walmart’s revenue has been steadily growing for the last decade, but the first time from 2006, it has decreased from the year 2015 to the year 2016 [66] (Fig. 9). It cannot be claimed that this decrease is because of the impact of electronic services, but it is important to take into consideration that Walmart has opened 74 new stores worldwide from the year 2015 to the year 2016, but still, the sales decreased [63]. At the same time, as already analyzed, Amazon’s revenue has been steadily growing, and it is estimated to continue increasing in the future [67]. The comparison matrix below shows some selected company metrics in order to provide a better understanding of the differences between the two (Table 1). When we observe all the facts and statistic that is obtained it is clear that online providers are taking the very important position in the retail industry and their market share is increasing rapidly over the time. On the other hand, traditional retailers are experiencing low revenue increase or in some cases even decrease. As shown above, many brick-and-mortar stores are closing down but it cannot be claimed that this is caused by this major development of electronic delivery channels and online retailers.

The Impact of Electronic Services on Traditional Services Table 1 Amazon and Walmart comparison matrix

327 Amazon

Walmart

Employees

341,400

2.3 million

Market cap

$433 billion

$228 billion

Revenue

$135 billion

$485 billion

Share price

$909.29

$75.43

Net income

$2.37 billion

13.64 billion

Income per employee

$6945

$5.932

2017 sales growth (%)

27.1

0.6

4.3 Netflix Another example when it comes to online services is Netflix. It operates in the entertainment industry and it provides customers with media streaming services and video-on-demand services. Netflix was founded at 1999, and at the time it offered DVD rental and selling, but slowly it shifted to the media content streaming, which is now one of its most important services. In the beginning, Netflix’s strategy was to create an efficient system for distributing physical DVDs through the mail, but its long-term strategy was to provide consumers video content over the Internet and PCs and to enable them to download videos directly to TV sets [68]. With Watch Instantly feature, Netflix enabled their costumes to play selected movies and shows on their computer immediately and with time their online streaming feature gained on the importance and it is now their major source of revenue, serving more than 93 million subscribers in over 190 countries and providing more than 125 million of streaming hours per day [69]. With this major success and growth, Netflix started to produce its own shows as “House of Cards” and “Orange is New Black”, which are now also important sources of revenue [69]. As Anderson (2006) argued, besides popular programming content from major media companies, niche content plays a significant role in the success of digital content providers. Netflix gives an opportunity to its users to watch thousands of titles for the price of $7.99 per month, including a one-month free trial [69]. The providing of added value, which is visible in more convenient delivery, lower prices and better quality of content, led to Netflix becoming the leader in the industry and gaining a competitive advantage over its competition. The revenue growth in the last decade showed in the graphic Fig. 10 is one of the indicators of Netflix’s expansion [70]. Even though the number of consumers renting DVDs by mail service is decreasing over time and in the last quarter of 2016, it lost 159,000 subscribers, it is still making a profit with 4.1 million people that are renting DVDs per mail [69]. At the beginning of the 2000s when Netflix and other digital media channels started to gain on importance, DVDs and other media sales went down 46% ($14.6 billion) in 2002, which led to the concern regarding the future of the brick-and-mortar stores in this industry [71]. The concerns proved to be reasonable as the number of

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Fig. 10 Netflix’s annual revenue [70]

video rental outlets in Europe decreased more than double from 2008 to 2012—in 2008 the number of video rental outlets was 23,608 and in 2012 it was 10,870, which represents a large and worrisome decrease (IVF). All this can contribute to the theory that the electronic way of delivery cannibalized the traditional sales, as the video and music rental outlets are closing down and the sales are steadily decreasing, as shown in the research and statistic cited above. The entertainment industry has lived through many changes, and the structure of the industry and economy has changed, and service providers are either adapting to this change or closing down their businesses.

4.4 Uber Uber is a tech company that provides a service similar to a taxi. In Uber, you can sign in as a driver if you have the conditions that uber requires, or you can ask for a private car that is giving you a ride and taking you where you want to go. Uber has a mobile app that has access to your location, has your credit car number, and if you need a ride, it will tell you how much is it and the route you are taking. The Uber service (and other companies like Taxify for example) is very similar to the services that regular taxis provide. However, uber took advantage of the new information systems and created a simple way for the common citizen that has a

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smartphone to move around the city he is in. A Taxi is a standard service that you find almost everywhere where you have a center that you can call to ask for a taxi that is picking you up in the place you are. Or, in the alternative, you can go to a taxi station where the taxis will take you where you want to go. The advantages that Uber has over normal taxi service are many: first of all, uber is very intuitive, it has access to your location, so you only need to tell them where do you want to go and if you want a particular type of car (more or less luxury, with more or less sits). All of the above mentioned are available in the app where you only have to download to your smartphone, create an account and associate your credit card number. It is more comfortable and faster than having to search for the taxi central phone number, waiting for them to answer the phone, and asking for the taxi for a location that sometimes might not be easy to explain for the taxi driver if you don’t know the place you are. With Uber, the driver knows exactly your location, so if you have your smartphone with you, it is not likely to fail to find you, and the app searches immediately for an available driver that will start going for your location right away. Also, if you are a foreigner or you are simply in a city that you don’t know very well, you can be tricked by a normal taxi driver. In Uber, you have access to the way the driver is taking you to reach your destination. Still talking about a foreign client, you don’t need to speak the language of the country you are at the moment to call a taxi. With Uber, you don’t need to talk on the phone, you have the app in English and you do everything to the online platform, from asking for the car to paying. Another factor and not less important is that Uber is less expensive than taxis in most of the countries. Uber is already available in 65 countries, in more than 600 cities, has more than 3 million drivers and approximately 75 million users around the world [72]. Maybe the biggest disadvantage in uber is that they are missing older potential customers that are the older people that don’t use smartphones, but in a few years, everyone will know how to use a smartphone. Also, if you are in a city where Uber doesn’t have many drivers, you might have to wait longer than in a big city. Besides this, uber is progressively gaining market share against taxis mainly because of the competitive advantage they got by using new technological platforms. However, Uber’s revenue growth slowed from Q1, when its top line expanded 70% YoY [73] (Fig. 11).

5 Conclusion The main purpose of this review was to show the difference between traditional and electronic services, the changes that occurred in service delivery and in the economy, and the changes in customer behavior and their expectations. This thesis is significant because the technology keeps developing, and it enables new ways of

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Fig. 11 Uber’s global quarterly gross bookings [73]

providing services, which cause concern when it comes to cannibalizing old-fashion providers. Many types of research and studies have been conducted on this matter, and most of them agree in one- the technology has changed the world we live in as well as our expectations, and it enabled new services and new delivery channels, which caused fear of the disappearance of traditional delivery channels. Some of the researchers showed that fear of cannibalization is unsupported [7, 55], others on the other hand, claim differently [6, 20]. The comparison of traditional and electronic retailers and service providers showed that the online providers gained on the importance and they experienced significant growth in revenue, whereas traditional brick-and-mortar stores revenue either saturated or decreased. The significant impact on traditional services could have been expected as most of the researches had been conducted in highly developed countries where the Internet is available to most of the citizens. Even in these countries, the poor and undeveloped rural areas were not taken into account when the research has been conducted, which may have had an impact on acceptance and the frequency of usage of electronic delivery channels and may have delivered different results. As the technology is developing daily, it is important to track these phenomena and changes that occur regularly and conduct more of up to date research and studies, particularly when it comes to this matter, as the older studies lose their significance with time.

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Use of Digital Technologies in Business in Slovakia Daniela Nováˇcková and Jarmila Wefersová

Abstract Business activities performed by economic entities are influenced by several factors. These factors include the regulation of business activities and the effects of the external environment, which undoubtedly include the introduction of innovation and digital technologies. Digitization, informatisation, automation, and robotisation have their impact on the improvement of competitiveness and are beneficial not only for industry but also for consumers. This scientific study describes by descriptive analysis phenomena and processes related to the use of digital technologies within the framework of business in some areas in Slovakia. The study opens a discourse on digital economy that changes the system of business and represents the challenge for new jobs. With the help of scientific methods and data obtained from the websites of major entities, while applying the principles of legal logic and systematics, accuracy, and the possibility of generalising, we have concluded that digital technologies are widely used in Slovakia in business, with the banking sector at the forefront. Due to the increasing use of digital technologies, we also addressed in this study the issue of personal data protection. The article presents an analysis of impacts from laws of the European Union on the formation of a digital market in Slovakia.

1 Introduction Digitization of industrial production and service providing changes the business models, the production, products, process, and the production of values. There are several business entities operating on the Slovak market, which are affected by digitization and innovation. Part of this process also represents the rise of a new branch of D. Nováˇcková (B) · J. Wefersová Faculty of Management, Department of International Management, Comenius University Bratislava, Odbojárov 10, Bratislava 25, 820 05 Bratislava, Slovakia e-mail: [email protected] J. Wefersová e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_12

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the economy, namely the digital economy. New in the New Economy is the proliferation of the use of the internet, a new level and form of connectivity among multiple heterogeneous ideas and actors, giving rise to a vast new range of combinations [1]. Internet has become the communication tool, it connects millions of people in more than 160 countries, while participants are from various social groups and it replaced telegraph, fax telephone, broadcasting, TV. Alexander Bain, the inventor of fax, came as first with remote data transmission, faxing his first messages already in 1843. The revolutionary change that is currently taking place in form of digitization affects all forms of business, because today we cannot imagine the functioning of a company or a service provider without internet and digital technologies. Interconnected networks have been created thanks to the internationally recognised computer expert Vinton Cerf. By introduction of the TCP/IP protocol the ARPAnet became internet used around the world. In 1991 the Swiss programmer Tim Berners-Lee introduced the World Wide Web, which is considered as the improvement of internet [2]. The first World Wide Web Internet was launched in the Swiss CERN, that caused a fundamental revolution in the communication and it is one of the mostly used tool not only in commerce, services, and business, but also among people. Digitization enables people to communicate publicly and accessibly through the web, while the price of this service is accessible [3]. With regard to the goal of this study in a broader context, we analyse the tools enabling communication between natural and legal persons in the field of financial services. Technologically modern, sophisticated equipment enables daily communication between entrepreneurs and state authorities. It is on a specific example that we point out the obligations of natural and legal persons in the field of tax policy in the context of using digital technologies. Respecting the increase of personal data being processed through the use of digital media, we also studied data protection as part of the Charter of Fundamental Rights in the European Union and the Treaty on the Functioning of the European Union. The scientific study also provides the results of DESI as it concerns Slovakia, which are processed by the European Commission.

2 Goal and Methodology The primary aim of this scientific study is to examine in what way the business environment in Slovakia has changed and how information technologies are used within business activities of companies. With regard to the expansive increase of digitization that has an impact on everyday life of citizens as well as on the business environment, we have decided to point out the use of digital technologies in practice with regard to the economic activities performed by companies, through the descriptive secondary analysis. We have focused on the use of digital technologies in the field of tax policies and in the area of providing financial services. At the same time, we examined the issue of data protection in the context of Slovak legal regulation, which is to a large extent influenced by the law of the European Union. With regard to the stipulated outcome, we have built on the scientific and expert literature, from

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the Slovak applicable legislation, from the primary and secondary EU law, judgements of the Court of Justice of the EU, and from the accessible websites of national authorities and institutions. With regard to the descriptive character of this study, we have used mainly classical scientific methods in processing its subject matter. We have used the method of structured observation, while we have determined in advance the category of Slovak applicable legislation in the field of taxes, financial services, and personal data protection. Through systematic analysis of laws, regulations and measures we have examined concrete tendencies related to digital technologies. Through deduction we interpreted their use in the business environment. Using the method of generalisation, we pointed out the impacts of introducing the digital technologies on the business environment. The method of specification, or concretisation, respectively, has served in studying the impact on some areas of business where digital technologies are being introduced. We used abstraction to define and give general and essential information on some tendencies in the Slovak legislation. The synthesis enabled us to connect the relations between the acquired knowledge in the field of taxes and financial services. In this context, we relied mainly on past and current Slovak legislation regulating the issue, as well as on professional published discussions of various domestic and, last but not least, foreign authors. As a method of information processing, we used the collection and subsequent analysis of relevant sources of literature. The method of induction and the method of deduction are also largely represented. By using the comparative method, we have highlighted the regulated digital money and the unregulated one. With regard to the set goal, we have identified two research questions: 1. 2.

How are digital technologies used in business in Slovakia? How is the personal data protection ensured in using the digital technologies in Slovakia?

To verify our first research question, we examined the applicable legislation and obligations established by law addressed directly to business entities. The analysis itself is based on the rules of legal logic, systematics, accuracy, and the possibility to generalise conclusions. Analysis and interpretation of the obtained results prove that the business system is changing and new models are merging as well as new types of jobs. To verify the second research question we used the method of legal comparison to compare the rights of persons from the point of view of personal data protection regulated by the Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) and the Law on Protection of Personal Data. The system of protection of personal data as applied in Slovakia has a transnational dimension and represents one of the tools for the protection of fundamental rights.

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3 Use of Digital Technologies in Doing Business In this part of the thesis, we focus on the use of digital technologies within the framework of doing business by companies. We will try to find the answer to the first research question: How are digital technologies used in business in Slovakia? In the interest of searching the correct answer we have analysed the important initiatives taken at the level of the European Union having significant influence on forming the digital economy. The notions such as digitization, informatisation, Industry 4.0, hands-free solutions form part of our lives and influence all social processes starting from the industry, through services, culture, and education [4, 5]. New possibilities arise, nonetheless accompanied with new problems. The basis for the functioning of the digital economy is formed by initiatives taken at the level of the European Union aimed at the creation of a digital market without frontiers. According to Miˇcátek [6]: In developing the digital economy, we must not forget digital-adapted regulations that promote fair competition, solve the problems of digital monopolies, and support innovative business models. In the period of building the common digital market it is necessary that the new common rules are introduced at the EU level. The digital market ranks among priorities of the European Union since 2010, when the initiative Strategy Europe 2020 was adopted. Legal basis for building the digital market are the Articles 4(2)(a), 26, 27, 114 and 115 of the Treaty on the Functioning of the European Union (TFEU). The digital single market boosts the economy and improves the quality of life through e-commerce and e-government [7]. The basis for building the digital market is removing the obstacles and creating suitable conditions. Ever evolving online markets and online software application stores bring benefits to consumers and save time. Digital integration, combining research areas, personnel, processes, users, and data will create conditions for scientific and technological achievements and breakthroughs, providing scientific and economic developments in related industries and, above all, in the global mineral and raw materials market [8]. The coordination at the EU level in the process of building the digital market is necessary because the digital transformation and financial instruments of the EU help to solve the current crisis of COVID-19 pandemic. Due to the COVID-19 pandemic many activities related to business can be ensured through digital technologies. Due to this unwanted era the digital technologies showed that it is possible that employees work from home, schools provided online training, and the banking sector performed most payment operations through online applications. Intelligent industry and inclusive economy will ensure the high employment rate and productivity, while the energy consumption should be reduced. Thanks to the development of technologies more and more human work is replaced by machines and automats. Simply put, many activities can be made better by technology than by humans. Innovations of internet platforms make the market access simpler, which has a positive influence on consumer policy and the boost of e-commerce. The modern procedures used by online platforms have big potential for the future and will advance further. The advance in technologies changes significantly various business sectors as well as professions. IT specialists, programmers and robot operating experts come to the

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forefront. Building cross-border services has a big perspective. Today’s digital technologies affect the organisation outside and in, enabling the creation of new business models and transforming the customer experience. The incumbents are acutely aware that they need to transform strategically—to build new networks and value chains [9]. One of the current priorities of the European Union is Shaping Europe’s digital future which includes connectivity, digital value chains, eHealth, data economy, artificial intelligence, digital platforms [10]. The digital economy and society index DESI contains tools for measuring the performance of digital economy. The DESI index includes the following indicators: • • • •

Connectivity: how widespread, fast, and affordable broadband is, Human Capital/Digital Skills: the digital skills of the population and workforce, Use of Internet: the use of online activities from news to banking or shopping, Integration of Digital Technology: how businesses integrate key digital technologies, such as e-invoices, cloud services, e-commerce, etc., and • Digital Public Services: such as e-government and e-health [11]. The European Commission started to monitor the DESI Index in its Member States. The Report DESI/2020 writes about Slovakia, that “Slovakia fell from 17 to 20th in the EU ranking with scores for some indicators well below the EU average. 27% of Slovaks have above basic digital skills, which is the best score in the Visegrad 4 region but it remains below the EU average (33%). Slovakia continues to improve the fast and ultrafast broadband coverage. The proportion of people who have never used the internet has decreased to 12% but remains above the EU average (9%). More Slovaks are using the internet (82%, up from 78% in 2018) and banking online (66%, up from 62% in 2018)” [12]. The process of digitization is most visible in the management of corporate data, finance, document management, protection and security, internal communication in companies or interaction with customers, but also in providing services. Part of the digital economy are online platforms, which are of particular benefit to the consumer as a recipient of the service. The example is UBER, an entity providing taxi services without owning a single car. The strong position of online platforms on the market discriminates other service providers who are unable to compete with innovative solutions. Slovak entities are unable to resist strong competitive pressure and therefore their only competitive advantage is price. The economic development of all countries directly depends on the use of intelligent digitization, which helps to automate and simplify several processes, while increasing both labour productivity and profits. Digitization and automation do not affect only production processes, but also the storage of documents that is necessary in business activities. Key benefits of business digitization include: • • • •

Reduction of overheads and other costs related to economic activity Saving time and human labour Increasing of energy efficiency Increasing the competitiveness of the company and thus its position in the market

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Streamlining workflows and eliminating duplication Deploying Cloud applications provides flexibility, speed, and clarity Improving the communication with consumers Supporting new business models.

The current pandemic caused by the spread of COVID-19 has helped to accelerate digitization and intelligent automation. It is obvious mainly on the use of internet banking in financial institutions and commercial networks, where most payments are realized through payment cards. Digital technologies transform all sectors of industries and all segments of services. New business models are formed, as well as the structure of jobs or professions. Digital technologies are used in every company, at minimum in the form of basic in-house digital system related to the financial and administrative processes. The individual units and departments in the company are interconnected with the aim of transferring and processing information based on the joint digital platform [13, 14]. Planning and management of production in real time, consolidation, and enhanced effectiveness of processes, as well as the increase of flexibility of operations are mostly ensured by modern technologies. Digital automatization of companies and factories is one of the strategies aimed at achieving of effectiveness, reducing error rate, saving time and costs as well as removing the manual work.

3.1 Digitization in the Area of Taxes Digital technologies are a set of all kinds of hardware and software devices that facilitate communication and access, transmission and storage of information and knowledge in a digital environment [15]. Electronic communication is constantly expanding, not only in business relations, but also in relations with national authorities competent in tax and other relevant agenda. An example is the Financial Administration of the Slovak Republic, which prefers electronic communication that has numerous advantages and in particular enables natural and legal persons to communicate with national authorities. The obligation of electronic communication for VAT payers was introduced in Slovakia in 2014 within the framework of the programme Internetization of Public Administration. According to the Law no. 563/2009 Coll. On the Administration of Taxes, the duty to file applications electronically applies to every. • Taxable entity who is a payer of value added tax, • Tax adviser on behalf of a taxable entity represented in the tax administration, • Advocate on behalf of a taxable entity represented in the tax administration. As of 1st January 2018, the mandatory electronic communication is extended to all legal persons registered in the Commercial Register and as of 1st July 2018 to every natural person—entrepreneur. Business entities are allowed to use electronic

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communications in the field of customs and the international exchange of information in the field of excise duties. Natural persons—entrepreneurs are obliged to communicate exclusively electronically with the Financial Administration as of 1st July 2018. In practice it means, that in addition to tax declaration all other documents will be delivered electronically. The Financial Administration of the Slovak Republic introduced a project of online connection for all entrepreneurs using the cashiers to the Financial Administration. The system of E-Cash (E-Kasa) represents the new electronic system for recording sales and cash receipts in real time, which will enable the integration of online cashiers and virtual registration cashiers within the central database of Financial Administration, real time data transmission as well as off-line mode. It represents one of the measures aimed at fighting tax fraud and removing unfair practices in business. As of 1st July 2019, all entrepreneurs must be fully connected to the ECash register system. The new online fiscalisation of E-Cash allows the tax authority to receive important data on sales and taxes directly after they are spent on their servers, which significantly simplifies the processing and control of the receipt. For entrepreneurs, the system of E-Cash will mean reducing the administrative burden when procuring hardware, a reduction in operating costs, a continuous transition between accounting days, and the availability of data during archiving. The system will also allow customers to verify the authenticity of cash documents in real time.

3.2 Use of Digital Technologies in Financial Services Nowadays there are many new trends in the development of digital technologies of banks as well as changes in business processes, banking products and services, service models and development of banks’ own ecosystems occurring under their influence [16]. Business activity is linked to the banking sector. Entrepreneurs as market entities use the products of financial institutions on a daily basis. The following table shows that the main Slovak financial institutions are already fully integrated into the zone Open the EU payment market (Table 1). For many banks and insurance companies the digital transformation enables to focus on products and services with high added value. The structure of new business models is following: • • • •

Alternative payment methods; Crypto actives; Crowdfunding; Tech insurance.

The Electronic payment system is used within the payment system, using a payment card, internet banking or other payment applications used in e-banking. Traditional means of payment, banknotes and coins are used in payments to a lesser extent and are replaced by electronic solutions, i.e., payments by cards, or, most recently, by phone or watch, even if the relationships among businesspeople have

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Table 1 Slovak financial institutions providing services Open the EU payment market (based on [17]) Financial institutions

Payment initiation service

Account information service

Card-based payment instrument issuer service

single SEPA credit transfer

single foreign payment

ˇ CSOB, a.s

✓

✓

✓

✓

✓

Poštová banka, a.s

✓

✓

✓

✓

✓

Prima banka, a.s

✓

✓

✓

✓

✓

Privatbanka, a.s

✓

✓

✓

✓

✓

Slovenská sporiteˇlˇna, a.s

✓

✓

✓

✓

✓

Tatrabanka, a.s

✓

✓

✓

✓

✓

Všeobecná úverová banka, a.s

✓

✓

✓

✓

✓

so far been based more on paper and metal. Electronic money represents monetary value stored electronically, including magnetic recording, depending on the used technology they are placed on hardware or software systems [18]. Software systems and products require online connection. There are several new innovative types of payments used at present. Another significant change in the area of financial services was brought by the Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market (PSD2) [19]. The directive was transposed in Slovakia by the Law No. 281/2017 Coll. amending the Law No. 492/2009 Z.z. on payment services [20], through which the payment system is liberalized and thus enables third parties to provide payment services. The aim of the Directive is to increase European competitiveness and participation of non-banking actors in payment services, harmonisation of consumer protection and rights and obligations of payment services providers and users by creating the equality of treatment throughout the Union between the different categories of authorised payment service providers. The following table compares the development in the field of payment services since 2007 due to the formation of the digital EU market (Table 2). Within this table we compared the legal basis for the creation of an EU-wide single market for payment services and innovative payment services. The digital technology has changed over a period of 11 years the payment services in the EU and in the world. Innovations in the area of financial services concern following new services:

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Table 2 Comparison PSD1 and PSD2 (based on [21]) The first payment services directive (PSD 1) in 2007

The second payment services directive (PSD 2) in 2018

Established the same set of rules on payments It includes provisions to: across the whole European – make it easier and safer to use internet payment services Economic area (European Union, Iceland, Norway and Liechtenstein)

– better protect consumers against fraud, abuse, and payment problems

To enable the legal foundation of a single

– promote innovative mobile and internet

Euro payments area (SEPA). was created: – direct debits – card payments – mobile and online payments technical standards

Payment services – strengthen consumer rights – strengthen the role of the European Banking Authority (EBA) to coordinate supervisory authorities and draft

• Account Information Services, AIS, • Payment Initiation Services, PIS, • Payment Instrument Issuer Service Provider, PIISP. The AIS payment account information service is an online service that provides consolidated information on one or more payment accounts that a payment service user has with another or more payment service providers. This service allows the client to obtain, through the account information service provider (third party) to which the client has given consent, information on the client’s account balance and the history of transactions on the client’s account. According to the Register of service providers, which is kept by the National Bank of the Slovak Republic, there are 20 foreign providers of information on payment accounts in Slovakia as of 1st November 2020. The Payment initiation service PIS allows clients to enter a payment order in the bank through a payment initiation service provider (third party) from the client’s payment account maintained by the bank, while the client consents to the execution of this payment order (the client authorizes the payment order). This service can be implemented in an online environment. Such services offer a low-cost solution for both merchants and consumers and provide consumers with a possibility to shop online even if they do not possess payment cards (recital 29 Directive (EU) 2015/2366). The legislator sought to respond to the ever-increasing rate of innovation in payment services, to increase competition in the market and thus achieve simplification of payments for clients. These services are provided on the basis of the Law No. 492/2009 on Payment Services (mainly its Articles 2 paragraphs 43 and 44, article 3 lit. (a) and (b), Article 28 lit. (b). In general, the influence of globalisation and European economic integration is evident also in the financial sector, which has a transnational dimension at present.

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3.3 Electronic Payment System The electronic payment system also serves to prevent money laundering. The Law No. 394/2012 Coll. on Limitations of Cash Payments limits the possibility to make cash payments exceeding the amount of 15.000 Euro in case of payments between natural persons who are not entrepreneurs. A natural person performing business activities or other self-employed activity or a legal person may make cash payments only up to 5.000 Euro. At the same time, with the adoption of the Law on Limitations of Cash Payments the tax authorities have a better overview of the activities of entrepreneurs and are able to better focus their attention on suspicious transactions. This legal regulation introducing the mandatory cashless communication above certain limit creates legal preconditions for the fight against money laundering, for the fight against corruption and crime and for the protection against terrorist financing. New digital technologies open up new possibilities and change the range of products and services of commercial bank services. Investments into innovations and changing priorities are too expensive and procedurally demanding especially for big traditional banks, nonetheless at the same time they all introduce the system of innovations and the most modern technologies in providing services to consumers. The Slovak financial market tis fully liberalized and many financial institutions are active therein. Each institution provides many products of electronic banking. As part of monitoring the provision of electronic banking services, we focused on a part of products and services. Banks are also trying to facilitate access to finance through biometric data, which is an alternative to the use of passwords. Technologies to recognize fingerprint, voice, face, or signature biometrics have been applied for a long time. Biometric solutions quickly find their application. The main reason is the rapidly growing use of mobile banking applications, customer comfort and security. In Slovakia almost all banks operating on the market are using biometrics.

3.4 Transactions with Virtual Cryptocurrency Transactions with virtual cryptocurrencies are also performed at present between entities, providing certain benefits. Virtual cryptocurrencies, such as Bitcoin or Litecoin were not recognized in the Slovak Republic as official domestic or foreign currency, and thus do not represent electronic money under the Law on Payment Services and have no physical consideration in the form of legal tender. (Explanatory Report to the draft Law No. 297/2008 Coll. [22]). In defining the notion of virtual cryptocurrency, the legislator was inspired by article 3 points 18 and 19 of the Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and amending

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Directives 2009/138/EC and 2013/36/EU (5th AML Directive) [23]. Secondary legislation introduces new obligations for exchange platforms of virtual currencies and providers of e-wallet services, who will have to carry out checks and report suspicious illegal transactions with cryptocurrencies as obligated persons in the framework of due diligence in relation to the customer, thus ending the anonymity associated with such exchange offices. Nonetheless, the Directive only covers situations of exchanges of so-called flat currencies for cryptocurrencies and vice versa, and not the exchange of individual cryptocurrencies for other cryptocurrencies. In connection with the sale of virtual currency, the Methodological Guidelines of the Ministry of Finance of the Slovak Republic No. MF/10386/2018–721 to the Procedure of Taxing the Virtual Currency were also adopted, which defines the digital currency as a digital bearer of value that is not issued nor guaranteed by a central bank or a public authority, nor it is necessarily linked to legal tender, does not have the legal status of currency or money, but is accepted by some natural or legal persons as a means of payment that may be transferred, stored or traded electronically. The national legislation further defines what can be regarded as the sale of virtual currency for tax purposes under the Law on Income Tax. As the sale of virtual currency is regarded “any exchange, for example exchange of virtual currency for assets or exchange of virtual currency for the provision of a service or its transfer for consideration, including exchange for another virtual currency”. It is evident from the above that the notion virtual currency began to be used as early as 2018. The amendment of the Law on Protection Against Money Laundering of 2020 introduced the notion of virtual currency (cryptocurrency), which was absent in the Slovak legal system. This legal regulation extends the list of specific business services to “the provision of virtual currency wallet services” and “the provision of virtual currency exchange services”. The condition for the operation of these services is the competition of the secondary general or vocational education. Article 9 lit. l) to lit. o) of the Law on the Protection Against Money Laundering defines. • “l) virtual currency as the digital bearer of value that is not issued nor guaranteed by a central bank or a public authority, nor it is necessarily linked to legal tender, does not have the legal status of currency or money, but is accepted by some natural or legal persons as a means of payment that may be transferred, stored or traded electronically, • n) provider of e-wallet services as a person providing services aimed at protection of private cryptographic keys on behalf of his/her clients, possession, holding, storing, and transferring virtual currency, • o) virtual currency exchange service provider as a person who, in the course of his/her business, offers or executes transactions with a virtual currency, the object of which is the purchase of a virtual currency for euros or for a foreign currency or the sale of a virtual currency for euros or for a foreign currency”. Legal definitions of these notions will increase the credibility of the market with cryptocurrencies for financial institutions. Following its membership in the European Union the Slovak Republic is obliged to transpose the EU directives into its national

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Table 3 Comparison: regulated digital money and unregulated digital money (based on [25, 26]) • Regulated digital money

• Non-regulated digital money

• Electronic money, digital cash, or e-money, • Virtual currencies that are not legal tenders is monetary value stored in a pre-paid card or (bitcoin) that exist without a central point of smartphone, for example means control like a central bank electronically, including magnetically, stored • They are an alternative to legal tender and they have no purpose other than the purpose monetary value as represented by a claim on of currency, they represent financial services the issuer which is issued on receipt of funds • These are not regarded as money from a legal for the purpose of making payment perspective. (ECB, 2015) transactions (Directive 2009/110)

legislation. These definitions are based on Article 3 points 18 and 19 of the 5thAML Directive of the EU 2018/843. Entities providing services related to virtual currencies cannot perform this activity on the basis of business license. According to Malata and Martaus [24] cryptocurrencies (virtual currencies) together with the blockchain are gradually creating a new social reality and it is only a matter of time before these changes are fully reflected in the legal reality too. For the time being, legal regulation in this area is limited to seeking appropriate legal definitions and the most appropriate application of the current legal framework to the trade in cryptocurrencies (especially in the area of tax and financial law). Due to trends in global financial markets, the system of providing financial services is also changing. Innovative financial services are mainly focused on the consumer, they are affordable and save time. Innovative financial services are therefore also subject of the EU legislation, which has a significant impact on Slovak laws. On the basis of the mentioned facts, the digital money can be divided into two categories (Table 3). If we consider criteria for determining the function of money. • as a medium of exchange—a means of payment with a value that everyone trusts, • as a unit of account allowing goods and services to be priced, • and as a store of value [25]. then our answer is that virtual currencies cannot be regarded as legal tender. Nonetheless, virtual currencies can be electronically transferred, stored, or traded. As the Court of Justice stated, in so far as, unlike that electronic money, for virtual currencies the funds are not expressed in traditional accounting units, such as in euro, but in virtual accounting units, such as the ‘bitcoin’ (Recital 12 Case C-264/14). The ‘bitcoin’ virtual currency was the question in the judgment of the Court of Justice of 22 October 2015 in Case C-264/14 [27]. The subject of the dispute was the exchange of traditional currencies for the virtual currency bitcoin and its exemption from VAT. Swedish national David Hedqvist wanted to provide services consisting of exchanging traditional names for the virtual currency bitcoin and vice versa. Before commencing such transactions, Mr. Hedqvist asked the Swedish Revenue Law Commission for a preliminary opinion on whether it be liable to pay VAT on the purchase and sale of bitcoin units. The Revenue Law Commission in this matter

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hold the view in 2013 that virtual currency bitcoin is a mean of payment used in a similar way to legal means of payment, and the exchange service was covered by the exemption under Chap 3, Paragraph 9, of the Law on VAT. The Skatteverket (Swedish tax authority) referred this opinion of the Revenue Law Commission to the Högsta förvaltningsdomstolen (Supreme Administrative Court). The Högsta förvaltningsdomstolen referred the questions on the basis of Article 267 TFEU to the Court of Justice, namely, whether such transactions constitute the supply of a service effected for consideration, and if so, whether they are tax exempt. According to the Revenue Law Commission, the bitcoin virtual currency is a means of payment used in a similar way to legal means of payment. Furthermore, the term ‘legal tender’ referred to in Article 135(1)(e) of the VAT Directive is used in order to restrict the scope of the exemption as regards bank notes and coins. It follows, according to the Revenue Law Commission, that term must be taken to mean that it relates only to bank notes and coins and not to currencies. That interpretation is also consistent with the objective of the exemptions laid down in Article 135(1) (b) to (g) of the VAT Directive, namely, to avoid the difficulties involved in making financial services subject to VAT. The Court of Justice in this case hold the view that “Article 135(1)(e) of Directive 2006/112 must be interpreted as meaning that the supply of services such as those at issue in the main proceedings, which consist of the exchange of traditional currencies for units of the ‘bitcoin’ virtual currency and vice versa, performed in return for payment of a sum equal to the difference between, on the one hand, the price paid by the operator to purchase the currency and, on the other hand, the price at which he sells that currency to his clients, are transactions exempt from VAT, within the meaning of that provision.“

3.5 Crowdfunding One of the modern business models is also crowdfunding or “collective financing”, respectively. Crowdfunding platforms operate through web technology and online payment systems as alternative financing for innovative projects. Scholz [28] shows that crowdfunding potentially shortens the development cycle of new products, thus enabling an earlier market entry. Hence, crowdfunding serves as a multifaceted early-stage support instrument for innovation implementation facilitated by the crowd’s resources. Her opinion is correct, it represents the alternative financing that forms part of the sharing economy. Business entities are directly connected by the investors or peer-to-peer lending platforms. The advantage of sharing economy is that through digital technologies it allows a wide group of natural and legal persons to participate in the sharing of own resources, goods or even by offering services. The rapid development of a shared economy is made possible by digitization. Collaborative financing enables investors to enter the company—acquiring a share in the assets (equity crowdfunding). At the level of the European Union and in Slovakia, a regulatory tool for the regulation of crowdfunding relations has not yet been adopted.

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In this context, we have to consider the need to distinguish crowdfunding from the concept of “collective investment”, which is regulated by the Law on Collective Investment Schemes. Crowdfunding ranks among the newly created alternative forms of financing directly connecting those who have funds at their disposal and want to lend or invest them with those who need funds to finance a specific innovative project. It represents a simple and relatively cheap way of raising funds from a crowd of people who contribute different amounts for rewards, starting with a thank you and ending with a share in the company. Start-ups gain a number of benefits through crowdfunding. It is not only a simple and cheap way of obtaining share capital, but also a way of obtaining important and significant information about the target market at a relatively low price. Through crowdfunding, the entrepreneur is able to determine the expected interest in his product, the target group, and also s/he can more accurately determine the selling price of the product when entering the market. It can also increase the awareness of the product and gain potential investors or partners. Crowdfunding in Slovakia is still at its outset. The essence of crowdfunding is that the applicant for funding, i.e., the author of the project, who is also referred to as founder in this area, registers on the crowdfunding platform, where s/he sets a goal—how many euros s/he wants to collect and also the date by which s/he wants to collect this amount as well as the duration campaigns. Subsequently, it is also necessary to present the project by a specific text, picture, or video so that the contributors, who are also referred to backers or investors, have the motivation to invest into the project [29]. We know various models of crowdfunding which differ in whether the donor—backer will receive a reward for his/her contribution and what kind of reward it will be. It often depends on the on the amount of the contribution submitted by an individual and on the crowdfunding model that the project used to finance it. The reward various from thank you email, through gaining the product prototype, to the participation in the profit through a share in the company. If the project does not reach the target amount in the specified time period, it depends on the model chosen by the funder at the beginning of the campaign, whether s/he will keep the money or it will be returned to the backers’ accounts [29]. The amount that backers can contribute to projects was not initially limited in any way. However, now when States are starting to regulate crowdfunding, rules have been created according to which investors—backers are also limited in the amount to which they contribute. In most countries, it mostly involves the regulation of the capital model of crowdfunding. According to Klembara [30] there are several models of crowdfunding campaigns: • Crowdfunding based on donorship—individuals provide money to the company or project on a voluntary basis. • Crowdfunding based on remuneration—the contributor obtains goods or services in exchange for provided funds, this model is often linked to the product pre-sale model. The reward also depends on the size of the contribution and can

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• • •

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vary from a thank-you email to, for example, the naming the production hall of the future factory after the investor. Presale of products—When pre-selling products, the campaign announcer raises funds for the development and production of his or her future product, with contributors pre-ordering with their contributions, however, usually at a lower price than the expected market sale price. Crowdfunding based on the profit sharing/capital – individuals invest for a share in the company, while the reward is the income generated by the company / project. It is mainly used in big projects. Crowdfunding loan model – the individuals lend money to the company or project for a loan and interest on the investment. In this model, the campaign owner has the position of a debtor and the contributor acts as a creditor. Securities (shares and bonds) – investment into securities represents another form of crowdfunding. However, it is the slowest growing model, as there are several obstacles involved. The entrepreneur has to give up a part of the capital and the investors still risk losing all their money. Another problem may involve the difficult administration of a high number of shareholders [30].

Participants in crowdfunding relationships are a group of natural or legal persons who have raised funds and an entity that brings a project that will be funded from the funds raised. The group of persons will financially support human creativity and inspiring business ideas that can be of economic as well as social significance. In its study of crowdfunding’s potential for the developing world, the World Bank considered recommendations from governments, NGOs and the private sector for four areas. Several aspects should definitely be considered and promoted in Central Europe as well (Table 4).

3.6 Insurance Services InsurTech There is no legal definition of the notion hereinafter referred to as “InsurTech” at present. And there is no European nor Slovak legislation applicable for insurance technologies at present, either defining InsurTech or laying down rules for the application and use of technologies in insurance. However, it is the duty of financial market participants to comply with all existing legislative provisions in the areas in which InsurTech intervenes. These apply not only in cases where various software applications are used to set up the insurance contract directly for the client when concluding insurance in a personal meeting with the client, but also when insurance at a distance is concluded via internet or by telephone. The insurance industry is constantly evolving as regards the use of digital technologies, and in recent years the technologies have been applied mainly in the distribution and management of insurance products, i.e., they are mainly used for mediation of insurance. These are mainly various applications searching for insurance according to the parameters entered by the client, internet portals comparing similar types of

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Table 4 World Bank: Recommendations for crowdfunding (based on [31]) Economic

Social

One should One should • craft exceptions to securities regulations that • harness top social media experts/bloggers/ allow easy registration for equity offerings tastemakers to communicate with local • strategically tie crowdfunding to cultural audiences messages • hold media and educational events to build awareness and understanding • form a crowdfunding market alliance • hold regular crowdfunding events with trusted third parties to teach successful techniques Technology

Cultural

One should • where appropriate, apply lessons learned from more developed countries • consider buy, build, or white label • determine gaps in existing technology for online financial transactions

One should • leverage existing incubator/accelerator/structured co-working spaces as hubs for innovation in funding • foster professional investor and consumer confidence in crowdfunding through education and communication • encourage the participation of women and girls

insurance products of various insurance companies, but also applications used in concluding insurance contracts, which determine the price of insurance directly to a specific client and can also include internet mediation of insurance contracts at a distance without a personal meeting with the client. A concrete example of online services are for example signature free contracts that are used in some types of nonlife insurance, such as travel insurance. This has helped to speed up the approval of contracts and, last but not least, this step is environmentally friendly and also contributes to saving financial resources.

4 Personal Data Protection Informatization and digitization will further continue, new equipment and technologies will arise offering enhanced possibilities. Nonetheless, digitization brings some risks, mainly the processing of personal data can be demanding. The security of data processing related to company data or even personal data of employees is, of course, crucial, because within the public as well as the private sector, data are transmitted through information and communication technologies for various purposes. The expansion of global business, the presence of parent companies and their subsidiaries with registered offices and establishments in various countries of the world and the associated global processing and transfer of personal data cannot be neglected either. Any leakage of such data can be very unpleasant for the company, in extreme cases even liquidation is the consequence. The company is responsible for security of data

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processing, and therefore must have a system of internal protection and especially the protection of personal data of employees. This duty follows from the national legislation as well as from EU law. There are high financial penalties at stake when these rules are infringed. The protection of natural persons in relation to the processing of personal data is a fundamental right. Article 8(1) of the Charter of Fundamental Rights of the European Union (the ‘Charter’) [32] and Article 16(1) of the Treaty on the Functioning of the European Union (TFEU) [33] provide that everyone has the right to the protection of personal data concerning him or her (Recital 1 Regulation 2016/679). The Treaty on the European Union in its Articles 6 and 39 regulate the issue of processing of personal data and their protection. The primary legislation was supplemented by the secondary legislation. However, the major breakthrough was brought by the GDPR. Data protection relates to any information related to identified or identifiable natural persons. In principle, it is the protection of rights of a natural person who is identifiable according to certain identifications (as a name, an identification number, genetic, mental, economic, cultural, or social identity of such a natural person). New EU data protection rules strengthening citizens’ rights and simplifying rules for companies in the digital age took effect in May 2018. At the same time, we have to point out the fact that increased use of new technologies and means of electronic communication in the employment leads to concerns related to the privacy of employees and new possibilities of monitoring them during their presence at the workplace. At present the protection of personal data is guaranteed at national level by the Slovak Constitution (constitutional law no. 460/1992 coll. The Constitution of the Slovak republic as amended1 and Law No. 18/2018 Coll. on Personal Data Protection and amending and supplementing certain Acts, as well as the Decree of the Office for Personal Data Protection of the Slovak Republic No. 158/2018 Coll. on procedure for data protection impact assessment. The reason for the adoption of the Law on Personal Data Protection is primarily the European reform of the rules on the protection of personal data, implemented in particular by the Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) [34]. New legislation expressly states that the consent of the involved person has to be clearly separable from other requirements and arrangements, and, that the consent of involved person can be withdrawn anytime without any reason. The catalogue of rights of personal data protection in the territory of the Slovak Republic has the following structure:

1 The

Constitution of the Slovak Republic in its article 19 guarantees that everyone shall have the right to be protected against unjustified collection, disclosure and other misuse of his or her personal data.

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• When processing personal data, the consent of an involved person is required. This consent should be provided by express and clear expression of the will, which is a free, concrete, informed and clear expression of the will of the involved person with processing of personal data. • Any processing of personal data has to be legal and based on the law. • Processed personal data have to be adequate, relevant, and limited to the list or extent of personal data necessary with regard to the purpose, for which they are processed. • The involved person has the right to correct his or her personal data in the information systems of the provider. • Personal data should be processed in such a way, that their adequate security and confidentiality, including preventing the unlawful access to personal data and means of processing the personal data. • The involved person has the right for the copy of his or her personal data that are processed. • The operator is liable for the processing the personal data. • The involved person has the right to object, if her personal data are processed for the purpose of direct marketing carried out by the profiling. • The involved person has the right to have his or her personal data erased when the purpose of the processing was reached. The Law stipulates that an area accessible to public may be monitored by video or audio recording only for the purposes of public order and security, detection of crime or breach of state security, and only if the area is clearly marked as monitored. The operator and intermediary are obliged to maintain the confidentiality of the personal data they process. The confidentiality and secrecy obligation are regulated in Article 79 of the Law on Personal Data Protection, and it lasts also after the termination of the processing of personal data. The law enforcement authorities are not bound by the obligation of secrecy when fulfilling their tasks according to the special legislation. The Office for Personal Data Protection of the Slovak Republic (Bratislava) is an independent state authority which performs the supervision of data protection and contributes to the protection of your fundamental rights and freedoms with regard to the processing of your personal data (Article 80 of the Law on Personal Data Protection). The Office monitors the implementation of the Law on Personal Data Protection, cooperates with the European Data Protection Board in the area of personal data protection. According to Article 104 of the Law on Personal Data Protection the Office for Personal Data Protection of the Slovak Republic is authorized to impose penalties for non-fulfilment or infringement of duties as stipulated by the Law. As an example, we have chosen the processing of personal data by the Financial Administration of the Slovak Republic, which in accordance with the applicable Slovak legislation and the GDPR Regulation, as well as in harmony with good manners obtains and processes the personal data of natural persons who claim their rights in fulfilment of tasks of Financial Administration. The Financial Administration receives the personal data exclusively for the defined or stipulated purpose, at the same time it has to ensure that only those personal data

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are processed that correspond by their extent and content to the purpose of their processing and are necessary to achieve this purpose [35].

5 Conclusion If we think at a global level, we will not avoid the process of digitization and robotization. New economic theories, practical knowledge and people’s thinking immediately raise the question of the natural development of information technologies. The process itself is to a large extent influenced by the achievements of science and technology and has international dimensions. The process of digitization is unstoppable and will move even faster in the light of new innovations. With regard to the first research question: How are digital technologies used in business in Slovakia? we can unequivocally state that in Slovakia the digitization is involved in almost every company or entity that provides services, because based on the facts we have shown that they use a digital system in administrative and financial processes. The clear answer to the first research question is that the digitization is used in the area of public administration, where the relationship between the financial administration and tax entity (natural or legal person) is involved. To a large extent the digitization is used in the accountancy. The Slovak legislation explicitly imposes the obligation for business entities to use digital technologies within their business activities and their communication. Our second research question was aimed at the system of protection of personal data. We have shown that under the influence of the EU law, a harmonized system of personal data protection has been adopted, which aims to ensure respect for fundamental rights and freedoms, in particular the right to the protection of personal data in the environment of new and increasingly used digital technologies. The involved persons can claim their right of access by the data subject (in accordance with Article 15 Regulation GDPR and with Article 21 of the Law on Personal Data Protection, right to rectification of inaccurate personal data (in accordance with Article 16 of the Regulation GDPR and with Article 22 of the Law on Personal Data Protection), right to erasure (‘right to be forgotten’) (Article 17 Regulation GDPR and Article 23 of the Law on Personal Data Protection, right to restriction of processing (Article 18 Regulation GDPR and Article 24 of the Law on Personal Data Protection,) right to data portability (Article 20 Regulation GDPR and Article 26 of the Law on Personal Data Protection), right to lodge a complaint with a supervisory authority, which is the Office for the Protection of Personal Data (Article 77 Regulation GDPR and Article 100 of the Law on Personal Data Protection). The operator is obliged on the basis of the law to eliminate the risks of misuse of personal data as much as possible. The Law enables the penalties to be imposed for the infringement of its provisions by the Office for the Protection of Personal Data. Further to this, the Slovak legislation meets European standards of personal data protection, which means stability in the international context and, above all, it has a positive effect on the business environment.

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References 1. Carlsson, B.: The Digital Economy: what is new and what is not? In: Structural Change and Economic Dynamics. Elsevier. Accessible at: https://doi.org/10.1016/ j.strueco.2004.02.001. Retrieved from: http://cs.wikipedia.org/wiki/Mobiln%C3%AD_tel efon / http://www.bezpecne-online.cz/prorodice-a-ucitele/teenageri-a-komunikace-na-intern etu/co-je-to-kybersikana-a-jak-se-projevuje.html (2004). Accessed 15 May 2018 2. Liˇcko, O.: Návrat do minulosti. Accesible at: https://www.mojandroid.sk/navrat-do-minulostiako-vznikol-internet-tema/ (2016). Accessed 23 October 2020 3. Molnár, E., Molnár, R., Kryvinska, N., Greguš, M.: Web intelligence in practice. Soc. Serv. Sci. J. Serv. Sci. Res. 6(1), 149–172 (2014) 4. Kaczor, S., Kryvinska, N.: It is all about services-fundamentals, drivers, and business models. Soc. Serv. Sci. J. Serv. Sci. Res. 5(2), 125–154 (2013) 5. Kryvinska, N.: Building consistent formal specification for the service enterprise agility foundation. Soc. Serv. Sci. J. Serv. Sci. Res. 4(2), 235–269 (2012) 6. Miˇcátek, V.: New rules to adress to business users of online intermediation services. Manažment podnikania a vecí verejných (online), vol. 4/2019, Bratislava (2019). ISSN 2453–8167 7. Maciejewski, M., Ratcliff, C.H., Næss, K.: The ubiquitous digital single market. Retrieved from: https://www.europarl.europa.eu/factsheets/en/sheet/43/digitalny-jednotny-trh-je-vsade (2020). Accessed 23 Nov 2020 8. Litvinenko, V.S.: Digital economy as a factor in the technological development of the mineral sector. Nat. Resour. Res. 29, 1521–1541 (2020). Retrieved from: https://doi.org/10.1007/s11 053-019-09568-4 9. Zaki, M.: Digital transformation: harnessing digital technologies for the next generation of services. J. Serv. Mark. 33(4), 429–435 (2019). Retrieved from: https://doi.org/10.1108/JSM01-2019-0034 10. Council of the European Union: Shaping Europe’s digital future. Retrieved from: https://www. consilium.europa.eu/en/policies/digital-single-market/ (2020). Accessed 3 Nov 2020 11. European Commission: What is the digital economy and society index? Retrieved from: https:// ec.europa.eu/commission/presscorner/detail/en/MEMO_16_385. (2016) 12. European Commission: Digital Economy and Society Index 2020—Country Reporting. The DESI 2020 reports are based on 2019 data. Retrieved from: https://ec.europa.eu/digital-singlemarket/en/desi (2020). Accessed 23 Nov 23 2020 13. Kryvinska, N., Greguš, M.: SOA and its Business Value in Requirements, Features, Practices and Methodologies. Comenius University in Bratislava, Bratislava (2014) 14. Greguš, M., Kryvinska, N.: Service Orientation of Enterprises—Aspects, Dimensions, Technologies. Comenius University in Bratislava, Bratislava (2015) 15. Mercader, C., Gairín, J.: University teachers’ perception of barriers to the use of digital technologies: the importance of the academic discipline. Int. J. Educ. Technol. High Educ. 17(4) (2020). Retrieved from: https://doi.org/10.1186/s41239-020-0182-x 16. Petrova, L. A., Kuznetsova, T.E., 2020: Digitalization in the banking Industry: digital transformation of environment and business processes. Finansovyj žhurnal—Finan. J. Finan. Res. Inst. Moscow 127006 Russia (3), 91–101 (2020) 17. Retrieved from: www.financial institutions 2021 18. Národná Banka Slovenska: Alternatívne spôsoby platieb. Retrieved from: https://www.nbs.sk/ sk/dohlad-nad-financnym-trhom/fintech/alternativne-sposoby-platieb#o. (2020) 19. European Union: Directive (EU) 2015/2366 of the European parliament and of the Council of 25 November 2015 on payment services in the internal market, amending directives 2002/65/EC, 2009/110/EC and 2013/36/EU and regulation (EU) no 1093/2010, and repealing directive 2007/64/EC (text with EEA relevance) OJ L 337, pp. 35–127 (23 Dec 2015) 20. National Council of the Slovak Republic: Act No 492/2009 on payment services (and amending certain laws), as amended by Act No 130/2011, Act No 394/2011, Act No 520/2011 (2009)

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Business Information Through Choice-Based Conjoint Analysis: The Case of Electric Vehicle Home Charging Marvin Klein, Christine Strauss, and Christian Stummer

Abstract Information and data fuel businesses and markets; thus, provision, generation, and interpretation of information and data are crucial to support managerial decisions. We demonstrate the generation of information through choice-based conjoint analysis using the example of electric vehicle charging. There are several alternatives for electric vehicle charging, with home charging being the main charging point for most of today’s electric and plug-in hybrid electric vehicles. Therefore, a large number of consumers consider home charging as mandatory when buying a car. Before blindly investing in the construction of charging stations close to citizens’ homes, decision makers (e.g., policy makers) need to learn about the impact of possible measures. This paper examines whether performance improvements in alternative vehicles (e.g., in terms of range or charging time) or governmental incentives (e.g., price subsidies) could compensate consumers for not having home charging stations. Findings reveal that, in general, both electric and plug-in hybrid electric vehicles profit from the construction of home charging stations, but its perceived benefit decreases continuously with faster charging times at public charging stations. However, at the present time, when the technological progress of electric vehicles remains low, monetary subsidies for environmentally friendly vehicles appear to mainly support only sales of plug-in hybrid electric vehicles.

M. Klein · C. Stummer Bielefeld University, Universitaetsstr. 25, 33615 Bielefeld, Germany e-mail: [email protected] C. Stummer e-mail: [email protected] C. Strauss (B) University of Vienna, Oskar Morgenstern Platz 1, 1090 Vienna, Austria e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_13

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1 Introduction In order to fight climate change, the European Union (EU) introduced a long-term strategy in 2019—commonly known as ‘The European Green Deal’—with the aim of achieving net zero greenhouse gas (GHG) emissions by 2050. The transport sector accounts for approximately 25% of all GHG emissions in the EU and is of special concern, as its carbon emissions have been rising more than those of most other sectors (e.g., energy, industry) [1]. While more investments in local transport might reduce the strong desire for individual mobility and digitization may improve traffic efficiency via autonomous driving or smart parking methods in the future, one of the key elements of a prompt energy transition may be a successful market introduction of innovative green modes of transportation, such as electric vehicles (EV) or plug-in hybrid electric vehicles (PHEV). With the aim of supporting the market diffusion of both EV and PHEV, the EU has undertaken such measures as penalizing environmentally unfriendly cars more severely. From 2021 onwards, the permissible emission limits for the average new passenger car in the EU will be only 95 g CO2 per km (previously this was 130 g CO2 per km). The penalty for exceeding this limit is e95 per vehicle for each gram per km [2]. To illustrate this, in 2019, only approximately 1 million out of 270 million passenger cars in the EU were either an EV or a PHEV [3]. Thus, according to a study by PA Consulting, Europe’s top 13 original equipment manufacturers (OEM) would have to pay e14.5 billion of penalties in 2021 with the same CO2 emission statistics for their fleet as those in 2019 [4]. However, in order to further incentivise the development of environmentally friendly engines, cars that emit less than 50 g CO2 per km are counted twice for a fleet in 2020, 1.67 times in 2021, and 1.33 times in 2022 [2]. The most frequently cited reasons for the currently low popularity of EVs among consumers are short driving range, a high purchase price, and lack of a charging infrastructure [5–7]. According to several studies, home charging in particular is considered one of the main adoption barriers for consumers [8–12] and is often termed a ‘knockout criterion’, as it is currently the main charging point for most EV drivers [13–17]. However, consumer demand for a home charging station might become less relevant once public charging infrastructure expands or next generation batteries help to increase driving ranges. In order to simulate the impact of technological progress on the market shares of alternative fuel vehicles, several authors have already examined consumer preferences towards specific vehicle attributes and their contribution to the overall utility of a vehicle via discrete choice experiments (e.g., [18–33]). However, none of them have explicitly studied the attribute of home charging. This is somewhat surprising, since it represents a beneficial differentiation from EVs/PHEVs to conventional vehicles (CV). Thus far, only [27, 28] considered home charging in their discrete choice studies; however, they did not study it as a standalone attribute, which is necessary for examining its impact uncoupled from other factors, such as charging station density or charging time.

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This work contributes to existing research in two ways. First, building on similar research that has already been conducted in this field, we present a choice-based conjoint analysis (CBC) to analyse consumer preferences regarding new passenger cars with combustion engines, electric motors, or plug-in hybrid drives. Second, we explicitly consider the promising attribute of home charging, which has thus far been disregarded in discrete choice experiments. This is our major contribution to the extant literature, as it enables decision makers to examine its impact separate from other factors, as well as showing interaction effects with other attributes. In doing so, we focus on new cars in the compact class and the (future) adoption behaviour of young potential German vehicle buyers. The remainder of this paper is structured as follows. In Sect. 2, a brief explanation of the methodology of CBC and a review of related work is provided. In Sect. 3, the design of the CBC study is described. In Sect. 4, the results of the parameter estimation are presented. In Sect. 5, different market scenarios are simulated to illustrate possible consequences of the findings. In Sect. 6, results from the CBC, managerial implications, limitations, and promising areas for further research are discussed.

2 Background 2.1 Choice-Based Conjoint Analysis CBC belongs to the family of discrete choice experiments. It is a purchase decision simulation in which participants must repeatedly choose between different products with varying attributes [34]; in this study, these products are passenger cars with combustion engines, electric motors, or plug-in hybrid drives. Discrete choice experiments have been developed independently in different fields of research, such as psychology, econometrics, or marketing. Therefore, the nomenclature is occasionally confusing or misleading. Discrete choice experiments, unlike CBCs, do not necessarily decompose utilities into an attribute- and level-based structure. In this paper, we utilise the term discrete choice experiment for the general concept and CBC for the special subcategory. A unique feature of conjoint analyses is that the objects/products are initially jointly considered based on the given choice tasks and then hashed into single components called ‘part-worth utilities’, which represent preferences for objects and their elements [35]. Due to its ability to closely represent reality, CBC has gained popularity since the 1990s and is now ‘the most widely used flavour of conjoint analysis’ [36]. It is advantageous because it enables researchers to analyse both main and interaction effects. Interaction effects occur when the net utility of two different attribute levels is significantly lower or higher than predicted based on the sum of their main effect parts. For example, red is usually a more popular colour for Ferrari cars than for other vehicle brands [36]. Further, CBC enables researchers to create alternative

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specific designs to avoid unrealistic product combinations (e.g., the possibility of charging a CV at home). However, CBC comes with some disadvantages. Although it replicates purchase decisions realistically, participants must process a large amount of information during a choice task. Therefore, it is recommended to consider a maximum of 10 product attributes [36]. Further, to avoid overstraining the respondents, it is recommended that respondents be presented with a limited number of choice tasks [35]. Originally, the information offered by discrete choice models was only sufficient to analyse aggregated preferences. However, with the higher computational power achieved in the mid-1990s, latent class analysis enabled clustering of participants with homogenous response behaviour. Subsequently, even individual part-worth utilities can be estimated using the hierarchical Bayesian estimation introduced by [37, 38].

2.2 Previous Studies The first attempts to study the market potential of EVs via choice experiments were a reaction to the oil crisis, with studies conducted by [39, 40] being the most cited. Interestingly, already then, the authors had identified range as a key barrier to adoption. The efforts of numerous countries to reduce carbon emissions in the transport sector led to a new wave of studies in the 2010s. Table 1 summarises the design of recent choice studies that were reviewed before designing the CBC of this study. The attributes engine type, price, consumption costs, charging/fuel station density (hereafter: station density), charging time, and range were identified as the most commonly used attributes in comparable studies. It is noteworthy that none of the reviewed choice experiments explicitly considers the attribute of home charging, although the findings of several questionnaire survey studies reveal that it appears to be a knockout criterion for numerous consumers [13, 14, 16, 17, 41]. Moreover, as of today, home charging is typically the most convenient and, thus, the main charging point for numerous EV drivers [13–17]. The only comparable studies that use CBC to consider home charging at all are those by [27, 28]. However, home charging is not considered a standalone attribute in either of the studies, as recommended by [43]. For example, [27] includes home charging in the attribute ‘fuel availability’ and combines it with the general filling station density (fuel availability: 10% of all existing gas stations; 50% of all existing gas stations; home; home and supermarkets). However, this merging only allows the simulation of charging either at home or at the station, which reflects reality to a limited extent. The study by [28] places the charging location indirectly in the attribute ‘refuel or charging time’ [refuel or charging time: Never; 5 min (station); 10 min (station); 2 h (home) and 10 min (station); 8 h (home) and 5 min (station); 8 h (home) and 30 min (station); 8 h (home)]. However, the complexity of this approach is reflected by an illogical or paradoxical output. For example, the possibility to charge in five minutes at a station had a higher benefit than the possibility of charging in five minutes at a station and to additionally charge in eight hours at home [44]. It is

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Table 1 Literature on choice-based conjoint experiments and EVs since 2011 (based on [42]) Engine Price Consumption Station Charging Range Home Other type costs density time charging attributes Achtnicht [18]

X

X

X

X

–

–

–

Performance

Bauer et al. [19]

X

X

X

–

–

X

–

Performance, design, equipment, brand

Byun et al. [20]

X

X

X

X

X

–

Local emissions

Daziano and Achtnicht [21]

X

X

X

X

–

–

–

Performance

Götz et al. [22]

X

X

X

–

X

X

–

Vehicle class, performance, political incentives

Hackbarth and Madlener [23]

X

X

X

X

X

X

–

Refuelling time, political incentives

Helveston et al. [24]

X

X

X

–

–

O

–

Brand, acceleration, fast charging capability

Hidrue et al. [25]

X

X

X

–

X

X

–

Acceleration

Hoen and Koetse [26]

X

X

–

–

X

X

–

Monthly costs, detour time, brands, political incentives

Ito et al. [27]

X

X

X

X

X

X

O

Vehicle class, brand

Lebeau et al. [28]

–

X

X

X

X

X

O

Fixed costs (per year), max. speed, brand

Qian and X Soopramanien [29]

X

–

X

–

X

–

Political incentives, annual running costs

Rijnsoever et al. [30]

–

X

X

X

X

X

–

Local emissions

Tanaka et al. [31]

X

X

X

X

–

X

–

– (continued)

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Table 1 (continued) Engine Price Consumption Station Charging Range Home Other type costs density time charging attributes Zhang et al. [32]

X

X

X

–

–

X

–

Vehicle class

Ziegler [33]

X

X

X

X

–

–

–

Performance

This study

X

X

X

X

X

X

X

–

Legend: X attribute considered, O attribute partially considered, − attribute not considered

possible that the chosen attribute levels have confused participants and they were not aware in which case they could charge at home and in which case they could not. For this reason, we consider home charging—in addition to engine type, price, consumption costs, station density, charging, time and range home charging—as a standalone attribute to investigate its impact uncoupled from station density or charging time (for a review of consumer preferences towards EV charging infrastructure, see [45]).

3 Study Design 3.1 Attributes and Levels Designing the study required a specification of attributes and associated levels. The attribute selection was discussed in a focus group which consisted of a total of six participants and we ultimately opted for four levels for each of the five ratio-scaled attributes: price, consumption costs, station density, station charging time, and range. The identical number of levels per attribute prevents the so-called ‘number-of-levels effect’, in which one or more attributes are erroneously assigned greater significance only because of the large number of levels [43]. In our study, we focus on new compact cars, which are the most popular in terms of sales in Germany [46]. Therefore, the selected values of the attribute levels encompass typical performances of new compact cars. Table 2 summarises the attributes and levels that were employed in this study, whereas the detailed selection process is discussed below. Engine type. The most important attribute characterising a vehicle is the engine type. In addition to a conventional combustion engine, the vehicles can have a plugin hybrid electric and an electric engine. We also consider PHEVs, which has often been ignored in comparable studies thus far, as this transitional technology has a high potential for market shares [47, 48]. Moreover, in Germany PHEVs are considered EVs by law and, therefore, also receive governmental subventions, as long as they are able to drive at least 40 km purely with the small electric engine or only emit a maximum emission of 50 g CO2 per km on average [49]. The attribute that the focus group most discussed, but ultimately did not explicitly consider, was CO2 emissions. At first glance, this may appear paradoxical, since

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Table 2 Choice-based conjoint study (attributes and levels) Attribute

Levels

Engine type

Electric (emission-free), plug-in hybrid (30% emissions), combustion (100% emissions)

Price

e19,000, e27,000, e34,000, e41,000

Consumption costs

e2/100 km, e7/100 km, e12/100 km, e17/100 km

Station density

25%, 50%, 75%, 100%

Station charging time (EV only)

5 min, 30 min, 2 h, 6 h

Range (EV only)

150 km, 300 km, 450 km, 600 km

Possibility of home charging (EV and PHEV only)

Yes, No

emissions are one of the main reasons why alternative vehicles are being researched at all. Further, they represent a crucial difference between an EV/PHEV and a CV. In contrast, previous studies have indicated that emissions have a negligible influence on the decision behaviour of participants (e.g. [22, 25]). This finding was also confirmed in expert interviews [19, 22, 48]. It can be argued that consumers generally prefer the environmentally friendly product alternative, but only if its performance and price are at a similar level compared to the non-green product alternative [50, 51]. Otherwise, only a few ‘dark green’ consumers are willing to pay a price premium for the common good (e.g., cleaner air). According to [22], this insight could be connected to the fact that the attribute regarding CO2 emissions is very abstract. Finally, the engine type itself indirectly suggests a high or low environmental performance. Therefore, and on account of the risk of participants encountering ambiguities if emissions are completely ignored, we link CO2 emissions to the attribute engine type. The values are not given in g/km but as percentages (like [25, 31]), as the focus group classified this information as more understandable. The CV with a CO2 emission of 100% serves as a basis; the PHEV value is 30% and the EV is emission-free. The values reflect the relative amount of local emissions. Price. As in all comparable studies, the purchase price for the respective vehicle was included as an attribute. In addition to the fact that high purchase prices for EVs and PHEVs are considered a strong adoption barrier, the attribute price itself is an important factor to guarantee a realistic purchase decision simulation [52]. As we focus on new compact cars in our CBC, we selected the following prices: e19,000, e27,000, e34,000, and e41,000. Consumption costs. Almost every similar study lists consumption costs as an attribute. However, unlike purchase price, the consumption costs of alternative vehicles are currently one of the biggest benefits [7, 22, 53, 54]. The consumption costs of EVs are approximately 50% lower than those for a CV. However, since the consumption of EVs is given in kilowatt-hours per 100 km, that of CVs in litres per 100 km, and that of PHEVs in combination, it is difficult to ascertain a standardised value for

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the attribute consumption costs. However, the most frequently used figure, particularly in German-speaking countries, was in e/100 km (e.g. [18, 19, 21–23, 30, 33]). This figure was also considered as the most reasonable one by the focus group and is, therefore, utilised in our study. The levels are e2/100 km, e7/100 km, e12/100 km, and e17/100 km. Station density. The lack of a well-developed public charging infrastructure is often suggested as an adoption barrier [5–7, 55]. This barrier does not appear to have as much weight in comparison with, for example, range anxiety; therefore, it is occasionally skipped in other studies for methodological reasons, probably with the intention to focus on other attributes [48]. However, in our study, it is important to include the attribute of station density to analyse its importance in comparison with the possibility of home charging. Further, the focus group argued that this attribute represents a key difference between CVs and EVs and omitting it might confound respondents. Following most of the other studies (e.g. [31]), the levels for station density were displayed as a proportion of the current conventional station density: 25, 50, 75, and 100%. Station charging time. In addition to station density, the charging time at these stations constitutes an adoption barrier [5–7, 48, 53, 55, 57]. Even with a welldeveloped charging station density, EVs would be rather inconvenient for longer journeys if long breaks had to be taken for recharging. While CVs and PHEVs are ready for operation again after 5–10 min, the battery of an EV usually takes several hours to be fully recharged if it is not charged at a modern fast-charging station. These fast-charging stations have the power to recharge 80% of the car’s battery within approximately 30 min, but at present, only a small number of such expensive fast-charging stations exist in Germany. Therefore, it is necessary to include charging time as an attribute in addition to the filling station density so that participants do not misinterpret its value [48]. In contrast to comparable studies (e.g. [23, 27]), the attribute station charging time is displayed—similar to [22]—exclusively for EVs in this CBC (see Sect. 3.2). However, participants were briefed to expect the current refuelling times at fuel stations. The levels are 5 min, 30 min, 2 h, and 6 h. Range. Range anxiety is currently one of the biggest problems of EVs [5–7, 48, 56]. Therefore, we consider it as an attribute in this CBC study. The current typical compact class EVs can drive around 150–300 km with one battery charge. Since it is unrealistic that ranges will decline in the future, 150 km is the lowest level, followed by 300, 450, and 600 km. The latter value represents—more or less—the driving performance of a CV. Like charging time, range is only displayed for the EV (see Sect. 3.2). However, in order not to confuse participants, we briefed participants to assume normal range values for PHEVs and CVs. Possibility of home charging. In addition to the general charging infrastructure, home charging is also included as a standalone attribute. For methodical reasons, this is absolutely mandatory in order to analyse public charging infrastructure and domestic charging stations independently of each other [43]. Surprisingly, home charging has thus far barely been considered in comparable CBC studies, although it represents a major difference from CVs and is an enormous additional benefit, as it saves the commute to a public charging station [7]. Further, current EV owners mainly

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recharge at home [13–17]. This lack might stem from the fact that certain studies indirectly imply that an EV can be charged at home. For example, [31] examines in their CBC the part-worth utilities for the costs of a home charging station (free vs. $1,000) but without taking into account whether or not home charging is possible at all. For an in-depth analysis of the importance of a charging station on one’s own property, particularly in comparison to the public charging infrastructure, this is not sufficient. Therefore, we consider the possibility of home charging in addition to public charging stations as an individual attribute, which was not done in earlier studies. Thus, the explicit consideration of the attribute of home charging is the major contribution of this study to extant literature, as it enables the examination of its impact uncoupled from charging station density or charging time. The possibility of charging the car at home (Yes, No) is logically only given for the EV and the PHEV (see Sect. 3.2).

3.2 Non-considered Attributes and Prohibited Combinations We first considered the inclusion of attributes such as special incentives for EV drivers (e.g., bus lane access or free parking) or attributes that represent the performance of the car (e.g., horsepower, maximum speed, or acceleration). However, we decided not to do this for methodological and content-related reasons. First, as explained above, it is necessary to keep the number of attributes as low as possible in order to not overstrain participants [35, 57]. Further, in comparable studies, incentives had a rather negligible influence on purchase decisions [22, 23]. Moreover, such incentives are rather unlikely to be feasible in Germany [58]. Finally, performancerelated attributes have been considered rather frequently in the literature (e.g. [19, 24, 25, 28]) but it is difficult to compare these values among the various motor types. Cars with an electric engine, for example, accelerate rapidly when starting up, but they have disadvantages in terms of top speed. In order to ensure a realistic purchase decision simulation, a few unrealistic combinations of attributes or levels can be excluded from the CBC. In [43] it is recommended to avoid prohibitions whenever possible, thereby guaranteeing a high quality in parameter estimation. According to [57], participants are capable of dealing with extreme hypothetical scenarios (e.g., a petrol station density of 25% for CVs). Further, these extreme scenarios subsequently enable the simulation of potentially interesting ‘what-if’ scenarios. Still, [57] argue that the use of prohibitions can make sense in certain cases in order to exclude absurd combinations and thereby increase the quality of the estimation (e.g., a CV that requires six hours to refuel). There are two ways to integrate prohibitions into the design. On the one hand, individual combinations of levels between two attributes can be excluded. For example, if we set the prohibition ‘engine type: CV/range: 150 km’, a CV with a range of only 150 km will never appear in the choice sets. On the other hand, combinations of individual levels with a whole attribute can be excluded. This method is called

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‘alternative-specific design’. For example, in our study no range value for CVs is displayed in the choice task [57]. While a few comparable studies completely forego prohibitions (e.g. [19]), individual combinations between engine type and individual attribute levels are prevented (e.g. [21, 23, 27]). Our study, like [22], employs an alternative-specific design and thus prohibits—as explained above—combinations between the engine type and entire attributes. Therefore, for the engine types CV and PHEV, neither ranges nor charging times are displayed. Further, for the engine type CV, no level was displayed for the attribute of ‘possibility of home charging’.

3.3 Implementation of the Study The study was conducted using Lighthouse Studio 9 from Sawtooth Software—the most widely used software for conjoint analyses of all kinds [35]—and comprised three parts. First, participants were asked to provide information on gender, age, and whether they have a driving license. Next, participants were briefed regarding the procedure of the study as well as the different cars and their attributes. Finally, every participant was required to complete the CBC experiment. Figure 1 illustrates a typical choice task of the CBC. We employed the complete enumeration strategy for choice-set randomisation for the alternative-specific design. Thus, every choice task consists of three vehicle alternatives—one EV, one PHEV, and one CV. Overall, we consider 13 choice tasks, one of which is a fixed hold-out task [59], a nonrandomised choice task created by the researcher and presented to each participant

Fig. 1 Example of a randomised choice task in the study

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in order to subsequently validate the models. We used this task in order to identify participants who did not entirely understand the questionnaire or did not take it seriously. Following [24, 60], our hold-out task has one alternative, which is extremely dominant in its characteristics compared to the others (e.g., lowest price, best performance, etc.) and appeared as the third-last choice task for all participants of our study.

4 Analysis The study was conducted as an online survey. A final sample of 552 qualified test persons from Germany was identified. The respondents were aged between 18 and 63 years, with an average age of 25 years. The gender distribution was 50.5% male and 49.5% female. Lighthouse Studio 9 was used to estimate the individual partworth utilities using the hierarchical Bayes method [61]. Note that we excluded the hold-out task from the estimation for methodological reasons, as this is not a randomised choice set.

4.1 Part-Worth Utilities Table 3 summarises the aggregated part-worth utilities of all participants in the output. This summary provides an overview and simplifies the interpretation of the results. Logically, we utilise the individual part-worth utilities for the market scenarios only later. The part-worth utilities are ‘zero-centred’, which implies that the values of each attribute level add up to 0. According to the standards of [62], the value of our model—with a percentage certainty (PCC) of 0.69745 and a root likelihood (RLH) of 0.71721—indicates a satisfactory fit. When examining the aggregated part-worth utilities of all participants, we found that the values of all levels of the ratio-scaled attributes make sense from a logical standpoint. Low purchase prices and consumption costs are more popular than high ones. A well-developed station density has a higher utility for the participants. Further, faster charging times and longer driving ranges are preferred. Moreover, it is plausible that having the possibility of home charging is preferred over having none. With regard to the engine type, it appears that the environmentally friendly EV performs best, over the PHEV and the CV. However, the comparatively high standard deviations for EV and CV suggest that there are strong EV/CV supporters as well as EV/CV opponents. On closer analysis, we found approximately linear utility curves for the attribute consumption costs (R2 = 0.99; see Fig. 2) and the attribute purchase price (R2 = 0.9576; see Fig. 2). This implies that the utility change for each additional euro is almost identical in the cost areas (like in [22]). For the attribute station density, the situation is different—the increase in utility from 25 to 50% is significantly higher

368 Table 3 Aggregated part-worth utilities

M. Klein et al. Attribute

Level

Engine type

EV PHEV CV

Price

Consumption costs

e19,000

Station charging time

Range

Possibility of home charging

Standard deviation

10.59074

56.05577

8.72474

23.54819

−19.31548

51.26827

52.93610

27.28792

e27,000

20.86090

13.30898

e34,000

−6.79519

11.21734

e41,000

−67.00181

31.02458

e2/100 km

69.55590

33.42598

e7/100 km

30.84028

17.37590

−19.57946

16.87559

e12/100 km Station density

Part-worth utility

e17/100 km

−80.81672

37.54267

25%

−31.56520

22.00604

50%

−1.64590

13.22667

75%

11.18910

12.67468

100%

22.02200

16.12329

5 min

53.96822

18.97706

30 min

6.33943

13.94316

2h

−21.60123

17.56683

6h

−38.70642

18.02564

150 km

−70.53319

32.70314

300 km

5.06087

12.57176

450 km

28.66847

14.66506

600 km

36.80384

27.94361

Yes

29.72150

19.81343

No

−29.72150

19.81343

than that in the range between 50 and 75%. Therefore, participants appear to expect a basic infrastructure; however, subsequently, other attributes are probably of greater importance (Log R2 = 0.9957; see Fig. 2). The utility curve of charging time is also logarithmic (Log R2 = 0.9874; see Fig. 2). On average, the largest decrease in utility occurs from 5 to 30 min. Subsequently, the utility per time unit decreases at a lower rate. This is in line with the findings of [22, 25]. The attribute range has similar progress, with the obvious difference that, in this case, the utility per additional kilometre increases (log R2 = 0.951; see Fig. 2). Our estimation reveals an extreme utility leap from 150 to 300 km. However, the increase in utility in the range of 300–450 km and, particularly, in the range 450–600 km, is substantially smaller (similar to that in [25, 30]).

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Fig. 2 Utility curves of the attributes with a ratio scale

4.2 Importance of Attributes The relative importance of the attributes results from the range of the part-worth utilities of the attributes—that is, the difference between the worst- and best-evaluated levels. The range of each attribute is then divided by the sum of all ranges [36]. Note that the basis for this calculation is the individual and not the aggregated value. The result is a measure in the form of a percentage, with which the importance can be compared and interpreted very clearly. Logically, the sum of these percentages is 100. A low importance of an attribute suggests that a change in its value only leads to a

370 Table 4 The average importance of attributes

M. Klein et al. Attribute

Importance (%)

Standard deviation

Consumption costs

21.85

9.23

Price

17.47

7.53

Range

16.68

6.78

Station charging time

14.10

3.86

Engine type

12.71

10.17

Possibility of home charging

8.67

5.39

Station density

8.52

4.34

small increase/decrease in the total utility of a product. In contrast, a value change in an attribute with a high importance is likely to lead to a larger increase/decrease in the total utility [22, 35]. It must be mentioned that the relative importance depends on the number and/or the values of the levels [43]. It is evident from Table 4 that consumption costs play an important role in the purchase decision of a vehicle. They appear to be even more important than the purchase price (like in [22, 32]). As expected, range and charging time are also rather important during a purchase decision. Surprisingly, the importance of the engine type is comparatively low. However, estimation results reveal a conspicuously high standard deviation here. Thus, the engine type appears to play a minor role for certain consumers when buying a car, while for others it is a decisive criterion. This heterogeneity in the preferences of the participants is frequently observed in the literature for environmental innovations [63]. Further, the relatively low values for station density and home charging may be related to the fact that they both form a subcategory of EV charging. However, for methodological reasons, as described in Sect. 3.1, it was imperative to list these two characteristics as independent attributes. In addition, it must be noted that only two levels, Yes and No, exist for the attribute regarding the possibility of home charging. In summary, it can be concluded that none of the attributes was classified as entirely unimportant. Thus, all considered attributes were relevant for a decision on product alternatives in the CBC study.

4.3 Interaction Effects An additional advantage of the CBC lies in the possibility of analysing interaction effects in addition to main effects [36]. The interaction effect that we find in our model relates to station charging time and possibility of home charging (p-value = 0.0045), which makes sense given that the faster the battery of an EV can be charged at a public charging station, the lower becomes the importance of the possibility of charging at home. The increasing range between the utilities for ‘home charging’ and ‘no home charging’ with faster charging times illustrates this effect (see Table 5); Fig. 3 visualises the changes in the spans.

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Table 5 Part-worth utilities: interaction effect between charging time and home charging Charging time 5 min Possibility of home charging Span

30 min

120 min

360 min

Yes

0.83

0.42

0.14

0.07

No

0.37

−0.22

−0.59

−1.02

0.46

0.64

0.73

1.07

Fig. 3 Interaction effect between the charging time and the possibility of home charging

With the aim of examining how the overall parameter estimation can benefit from the inclusion of this interaction effect, we conducted another estimation with the consideration of the interaction effect of station charging time and possibility of home charging. The additional modelling improved the original RLH of 0.71721 (PCC 0.69745) to 0.73182 (PCC 0.72361). However, we classified the potential improvement as too small and utilised the original parameter estimation for further analysis specifically to avoid the danger of ‘overfitting’ the model with such a measure. This implies that the extra parameter may lead to a better RLH, but not necessarily to better forecasts in subsequent market simulations [64].

5 Market Simulations To demonstrate the implications of our CBC results, we established market simulations using the choice simulator from Lighthouse Studio. Overall, we simulated ten different market scenarios: (i) a baseline scenario; (ii) a purchase price subsidy scenario, in which purchase prices are e9000 lower for EVs and e6750 lower for PHEVs (note that this reflects the current situation in Germany [65]); (iii) a CO2 tax

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Table 6 Values of the baseline scenario Attribute

EV

PHEV

CV

Engine type

Electric engine

Plug-in hybrid

Combustion engine

Price

e36,000

e37,000

e23,000

Consumption costs

e5.04/100 km

e7.12/100 km

e10.47/100 km

Station density

37%

100%

100%

Station charging time

360 min

n/a

n/a

Range

230 km

n/a

n/a

Possibility of home charging

No (yes)

No (yes)

n/a

scenario, in which we assume a CO2 tax of e200/t CO2 and, thus, a gas price of e1.984/L; (iv) a range scenario, in which we assume the technological progress of EVs within a range of up to 500 km; (v) a station density expansion scenario, in which we assume a charging network of 100% compared to conventional gas stations; (vi) a fast charging scenario in which the charging time at every public charging station is reduced to 30 min; (vii) a combination of iv and v—that is, a range of 500 km and a charging network of 100%; (viii) a combination of iv and vi—that is, a range of 500 km and a charging time of 30 min; (ix) a combination of v and vi—that is, a charging network of 100% and charging time of 30 min time; and (x) a combination of iv, v, and vi—that is, a range of 500 km, charging network of 100%, and a charging time of 30 min. For every scenario, we performed two simulations, one considering the possibility of home charging and one without this possibility. Thus, we utilised the first-choice model so that consumers always buy the product which yields the highest total utility, based on individual estimates. The basis setting of the simulation is the baseline scenario (see Table 6). For the other settings, we utilised sources from the websites of various producers with current vehicle performance levels of new compact cars and German Federal Network Agency data for station density [66]. In addition, we consider a gas price of e1.52/L and an electricity price of e0.277/kWh. When examining the results of the simulations without considering the possibility of home charging in Table 7, we found that in the baseline scenario (i) approximately two thirds of all consumers would prefer a CV, 22% a PHEV, and 12% an EV. Further, the introduction of a price subsidy in scenario (ii) would almost only support the adoption of PHEVs without further technological progress of EVs. We found a similar effect in scenario (iii), in which a potential CO2 tax would lead to consumption costs of CVs to e13.66/100 km and e8.09/100 km for PHEVs. In particular, the PHEVs profit from price advantages. In scenarios (iv), (v), and (vi), we assumed the technological progress for EVs, which unsurprisingly leads to an increase in the popularity of these vehicles by 20% in the increasing range scenario (iv), 16% in the 100% public charging station scenario (v), and 17% in the fast charging scenario (vi). Interestingly, it appears that in all scenarios, the improving EVs rather cut the market share of PHEVs than the market share of CVs. In scenarios (vii), (viii), (ix), and (x), we combined different scenarios in which we assumed the technological progress of EVs. Thus, the technological progress of EVs in range and station density according

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Table 7 Market shares of the different scenarios Scenario

Market shares of EV (with HC)

PHEV (with HC)

CV (with HC)

(i) Baseline

12.14% (14.31%)

22.10% (45.65%)

65.76% (40.04%)

(ii) Price subsidies

15.40% (17.57%)

38.49% (65.94%)

46.01% (16.49%)

(iii) CO2 tax of e200 per t CO2

15.22% (17.57%)

32.79% (56.16%)

51.99% (26.27%)

(iv) EV range 500 km

19.75% (28.26%)

18.12% (35.87%)

62.14% (35.87%)

(v) EV station density 100%

16.12% (21.38%)

19.20% (40.40%)

64.67% (38.22%)

(vi) EV charging time 30 min

17.03% (22.83%)

19.20% (39.31%)

63.77% (37.86%)

(vii) Scenarios iv and v [range 100%]

32.97% (47.28%)

11.23% (22.10%)

55.80% (30.62%)

(viii) Scenarios iv and vi [range 30 min]

38.04% (52.17%)

8.70% (18.84%)

53.26% (28.99%)

(ix) Scenarios v and vi [100%, 30 min]

29.53% (40.22%)

11.59% (26.09%)

58.88% (33.70%)

(x) Scenarios iv, v, and vi [range 100%, 30 min]

53.99% (70.29%)

4.35% (8.70%)

41.67% (21.01%)

Legend: CV conventional vehicle; EV electric vehicle; HC home charging; PHEV plug-in hybrid electric vehicle

to scenario (vii) would lead to EVs having a market share of 33%, in range and station charging time according to scenario (viii) to a market share of 38%, and in station density and station charging time according to scenario (ix) to a market share of 30%. Consistent with the scenarios in which we only improve one vehicle attribute of EVs, it appears that the improved EVs steal market share from PHEVs rather than from CVs. This effect is particularly noticeable in scenario (x), in which we assume technological progress for EVs in range, station density, and station charging time. This simulation, in which EVs have a similar performance to CVs, would lead to an increase of 54% in market share. However, PHEVs achieve only approximately 4%.

6 Conclusion OEMs will face stricter regulations by the EU with regard to their fleets’ emissions from 2021 onwards. Therefore, the successful introduction of green modes of transportation is an important factor in avoiding high emissions, and thus penalties. This

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paper employs CBC to examine the (future) market potential of EVs and PHEVs under different (technological) circumstances, thereby closely examining the home charging attribute. The findings support decision makers in optimising the use of their resources. The results of the parameter estimation and market simulations reveal that without technological progress of EVs, the overall acceptance is relatively low. Without EV improvements in range, charging time, or charging infrastructure, even a purchase price subsidy of e9000 for EVs and e6750 for PHEVs would not significantly support EVs; however, it is likely to boost the market shares of PHEVs. This recalls the situation in the Netherlands, where PHEVs profited more than EVs from such a subsidy, with the consequence that the government cut subventions for the less environmentally friendly PHEVs [67, 68]. A scenario in which a CO2 tax of e200/t is assumed, which would lead to an increase in the consumption costs of CVs, has a similar effect to that of the subvention scenario. Although the consumption costs of PHEVs would also increase slightly, without the technological progress of EVs such a tax would instead support the diffusion of PHEVs. According to a study from PA Consulting [4], Europe’s top 13 OEMs would have to pay e14.5 billion in penalties in 2021 with the same CO2 fleet statistics as those in 2019. Therefore, a short-term push for PHEVs might be interesting from a manufacturers’ perspective, since PHEVs which emit—in test mode—less than 50 g CO2 per km are considered EVs by law [2, 49]. Therefore, PHEV sales can be important in terms of significantly improving manufacturers’ fleet CO2 statistics, thereby avoiding penalties. Although the new EU regulations are an important step to cut GHGs in the transport sector, they only address the local emissions of an average car. Thus, they do not necessarily reduce GHGs as more cars are produced or EVs are not recharged with renewable energy. Therefore, further research must address new modes of transportation, such as car sharing. Range is often considered a major disadvantage of EVs [5–7]. Our findings support this view, as it has the highest importance of all EV-specific attributes for participants during a purchase. Thus, it is not surprising that a scenario in which we simulated technological progress in range had the highest impact on EV sales over technological progress in charging time or charging station density. Interestingly, we found that these EV specific improvements rather cut market shares of PHEVs than CVs ([22] came to similar results). This finding is particularly evident in a scenario in which we combine the technological progress of EVs in range, charging time, and charging station density. There, PHEVs—without price subventions or consumption cost advantages over CVs—barely gain any market shares. However, if CVs become less attractive due to political interventions (e.g., emission-free zones in city centres or tighter EU specifications regarding CO2 emissions), it is likely that consumers who strongly prefer CVs make the switch to PHEVs rather than EVs. Therefore, integrating such governmental interventions in future market prediction could be a promising area for further research. Further, although the development of a public charging network for EVs has, in our simulation, a relatively low impact on overall EV acceptance, our results confirm the findings of other researchers (e.g. [13–17]) that the possibility of home

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charging appears to be of high relevance when deciding for or against an EV/PHEV. In every scenario, the consideration of the possibility of home charging for all consumers significantly decreased the market share of CVs (up to approximately 50%). Depending on the scenario—that is, the state of technological development of EVs—either PHEVs or EVs benefit more from a home charging possibility. EVs are often considered perfect city cars, as they accelerate fast, have an adequate range for daily urban traffic, and are locally emissions-free. However, city residents often do not own a garage or carport where home charging is easily done. Therefore, the role of home charging in EV diffusion is of special concern. In our study, 96.6% of all participants have access to a parking lot close to their home. However, only 28.3% have access to a parking lot at which power supply can be set up (e.g., garage, carport). Parking lots without a power supply are typically located on the roadside. Therefore, the purposeful construction of charging points at these parking lots could increase the acceptance of EVs and PHEVs more effectively than a general expansion of public charging stations. Nevertheless, it is important to keep the improvement of charging times in view, since we find an interaction effect between the attributes of home charging and station charging time, which reveals that the faster the charging time at public stations, the less relevant the possibility of home charging becomes. In simpler terms, if drivers could recharge their EV at every charging station in a time frame of approximately five minutes, they would not really care about having the possibility of home charging. However, this would not make home charging obsolete, as home charging stations could be further used to stabilise the electricity network in the future via ‘vehicle-to-grid’, a method in which the EV battery supplies electricity back to the power grid [69, 70]. There are limitations to our study. As the target group of our study was young German car drivers, the results might not be representative for the entire EU or even for Germany. Moreover, the study assumes that people will continue to buy private cars and does not consider new modes of transportation, such as car sharing or increased utilisation of public transport. Finally, the choice simulator used for the market simulations only can allocate the home charging option to either all or none of the consumers and not individually, which does not represent the real world, in which some car drivers have an appropriate garage and others do not. This feature could be integrated in further research using more complex diffusion simulation models, such as agent-based simulation (e.g. [32, 42, 71]).

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The Combination of “Loft” and “High-Tech” Styles in the Formation of Interior Spaces for IT Companies Olena Ivanochko and Jennifer R. Calhoun

Abstract The overall idea of the office design is to reflect the accepted style of the company, and express that image in every detail, inclusive of the interior. The outcome is to provide an exclusive brand image. Nowadays, interior design is especially popular for IT companies. Arranging an office space for an IT company, provides a creative interior project, which perfectly fits the corporate style of the company in its exclusive design, and original approach to the employee workspace and, the creation of a unique image. It is much more important that the area designed for staff work and customer service be functional, comfortable, and inspiring to induce productive work. Modern interior is characterized by a great variety of styles and trends. However, due to a number of objective reasons, only the combination of hi-tech and loft styles is the most comfortable and cozy for the office space. Particular attention is paid to ergonomics and office zoning. The interior of the room has a significant impact on those who stay in it for a long time. Numerous medical studies have shown that the color scheme and shape of the surrounding objects have a significant impact on performance and thinking style. The interior affects the overall well-being of employees, because it is at work that modern man spends most of his time.

O. Ivanochko (B) Faculty of Management, Comenius University in Bratislava, Bratislava, Slovakia e-mail: [email protected] J. R. Calhoun E. Craig Wall Sr. College of Business Administration, Coastal Carolina University, Conway, USA e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_14

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1 Historiography of Loft Design and High-Tech Development 1.1 Sources and Historical Aspects of the Emergence of Loft and High-Tech Styles in Design The “loft” style in architecture in the beginning has an American significance with the emergence of modern style in the 40s of the last century in New York City. Various manufacturing firms began moving outside the city or on the outskirts. Due to the value of land, especially in the central part of the city created opportunities for the new modern design. is much more expensive than in. This resulted in the phenomenon of renting vacant premises to private individuals due to large spaces of former factories and shops being utilized for private residences. Fortunately, during this period, there were people who wanted something original, more space, and did not want to conform to the norms and rules of the current interior designs. The loft style design became popular among artists and art enthusiasts. In addition, creative individuals were able to combine housing and workroom into one space [1, 2]. During the 50s in the United States, the loft style had firmly taken a niche in the category of expensive and original housing for creative individuals. Mostly these were huge apartments of hundreds of square meters. Of course, the price of such a room was very high and not everyone aspired to live in such an unusual industrial room. The loft style reached its greatest popularity in America in the 60s. When the world-famous artist Andy Warhol opened his textbook “Factory” in Manhattan, the house where he and his students lived [3]. During the 60s loft style moved to Europe, and began to gain popularity in Britain, Germany, Austria and the Netherlands. In England, the first loft-style buildings were in the Clerken Wall, located in north London. The widespread popularity of “factory housing” was when Margaret Thatcher was the Prime Minister of the United Kingdom. The main impetus for the development of a new concept of “loft” in Britain was the economic actions of the government, which equalized industrial and administrative rights in central London and the rent of industrial and office premises equalized. The favorable location and unusual design of the space began to attract the attention of the bohemians of the city, and then the common people of London. This same system also worked in the United States during this period. Due to the popularity of “factory housing” in Europe, there was a lack of such premises. Resulting in loft-style homes, schools, and old warehouses being transformed into decorated dwellings. In Finland, the railway station became the most famous residential complex. In the post-Soviet space, the first classic loft was considered an elite residential complex, which appeared in Kipsala, Riga in 2003 where architects Zaiga and Maris Hailis preserved all the features of the historic appearance of the old gypsum factory [4, 5]. During the second half of the twentieth century, “High technology” became the direction in architecture. There were the mastery of the latest innovations and

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developments in advanced industry sciences and technology, as well as advances in constructivism. Houses in this style resemble samples of modern technologies, prefabricated production modules, containers. The expressive element of the image sometimes becomes the infrastructure of the building [6]. In the late 70s, the culture of postmodernism spread its influence on the mastery of the technological sphere. “The works of hi-tech were an alternative to vanishing modernism with its tendency to unify and were essentially a realization that spread for the idea of postmodernism.” [7]. This term began to be used after 1978. However, objects that embody the concept of this area had emerged earlier. One of the first was the Georges Pompidou National Center for Arts and Culture in Paris (1977). The authors of this object were Richard Rogers of England in an agreement with the Italian architect Renzo Pia. Steel structures of the tubular frame were made outside the outer fence like scaffolding. The networks of engineering support were also taken out. According to the purpose, the vertical communication pipes were brightly painted. The most important element for the six-storey building was a zigzag of movable projects, folded into a glass cylinder, which diagonally crosses the facade area. In this building, there is a noticeable difference with the architecture of modernism. Hi-tech was initially treated lightly and was considered a frivolous style. However, it developed successfully during the 80s, and increased the influence in the architecture of industrial buildings, as well as a positive influence on industrial design. In the 90s high-tech defined the style of modernity, which harmoniously began to create objects using high technology. Along with the design of architectural objects, high-tech was also developing in the interior design. The main use being in industrial equipment. Introduction in the style of high-tech furniture from metal elements, produced for the manufacture of racks for warehouses, factories, and locker rooms in domestic premises [8, 9]. Bus, plane, dental chairs, objects from laboratories are often used as furniture. The interior often looks like a collage of things created for other purposes. Technical details from military and scientific fields were used in the creation of furniture and other objects. Classic examples of high-tech in subject design are the Nomos office furniture system created by Norman Foster in 1987, as well as a container cabinet made by Mateo Tuna in 1985 [10]. Famous high-tech style designers Richard Buckminster Fuller Even before this direction in design became popular, it became the main focus for Richard Buckminster Fuller (1895–1983), an American engineer, designer, inventor and philosopher who gained popularity in the 1920s. Fuller was the author of many projects, which were usually called “futuristic” and remained on paper, except for a few, which he managed to implement. He coined the neologism “dimection” (formed from two words—“dynamic” and “maximum”—and planned “dynamism plus efficiency”), which he applied to projects such as “Dimection House” (1927), construction with empty floors and one central support. There was also the three-wheeled car “Dimekshn” (1933), as well as a factory-made bathroom, where appliances and

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plumbing were an integral part of the structure, which could be fully assembled in advance. Although each of Fuller’s projects aroused interest, none of them were launched into mass production, as their creator suggested. However, the geometric concept developed by him made it possible to build hemispherical domes from triangular parts, and eventually led to the emergence of a geodesic dome, which was built of different materials. An example of the use of a geodetic arch is the US pavilion at the World’s Fair in Montreal in 1967. The huge dome (more than a hemisphere) was lined with light-transmitting plastic panels, the number of which was controlled by automatic blinds [11]. Rogers and Piano The most famous high-tech building is the Georges Pompidou Center in Paris (1971– 1977). It was designed by a team that included the Italian Renzo Piano (b. 1937) and the Englishman Richard Rogers (b. 1933). The frame, communications, and escalator in a large, multi-story building, are placed on the facade. Indoors are equally noteworthy because of the cables, lighting and piping that are carefully hidden in most buildings. The building was a great success with the public, becoming a Mecca for tourists and Parisians. Rogers and Piano won the competition for the best Pompidou Center project at the beginning of their careers. Their original design concept was based on a firm belief in the need to provide freedom and comfort to the people who will use the building. “We believe that buildings must be able to change not only in plan but also in section and vertical projection. Freedom that allows people to act at their own discretion …” This framework must allow people to act freely inside and out, change and to adapt to technical and human needs, this architecture is more like a giant Meccano than a traditional static dollhouse with glass or solid walls. “Some commentators criticized the building for its lack of expressive design because the building was hugely popular with visitors to exhibitions. However, the center was severely condemned by Rogers in 1999. After finishing work on the Pompidou Center, Piano designed the Museum of the Collection. The Bayler Museum-Gallery, created by him (1998) in Basel, Switzerland, is a fine example of high-tech style. The most spectacular of Rogers’ independent projects is the Lloyd’s office building in London (1978–1986). As in the Pompidou Center, most of the communications are outside [12, 13]. Norman Foster Norman Foster was born in Manchester in 1935. A talented English architect and head of his own company “Foster and Partners”. The only architect who was able to get repeatedly into the prestigious Rich List. It’s no secret that the profession of an architect is not associated with huge incomes, but he was able to build a successful company, both financially and in terms of productivity. His works can be found all over the world. Norman Foster’s Mary-Ex skyscraper has become a modern symbol of London. With 13 offices in different countries, the company creates a huge number of projects, and the architect himself, despite his advanced age (he is already over 80) is still full of original innovative ideas. He directs funding to research related to 3D printers and is also seriously interested in space. It seems that there is no place left

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on our planet worthy of his work, so now the company is working on the concepts of the settlement of the Moon and Mars; who knows, maybe they will soon become real projects [14]. James Stirling British architect James Stirling (1924–1992) is a representative of high-tech style. The building of the Faculty of Engineering at the University of Leicester in England (1959, in collaboration with James Govan) attracted public attention thanks to the glass office building adjacent to its wedge-shaped blocks, which housed lecture halls on the ventilation pipes, resembling a ship. Adjacent to the building is a low building that house shops. Interiors have the same characteristics as facades. The building of the Faculty of History (1964–1967) of the University of Cambridge, England, is almost entirely devoted to the library and has a large gallery with a glazed roof. Here the design determines the nature of the interior space. As Stirling’s career progressed, his work gradually became more complex. The interiors of Olivetti’s training building in Haslemer, England (1969) are very diverse, so they can be used for events of various scales and nature. Glazed galleries with sloping paths connect different parts of the building. Stirling’s last major project was an extension to the State Museum in Stuttgart, Germany (1979–1984). Here he moved away from high-tech style and turned to a bolder direction. The galleries are located around a round courtyard with marble walls, with statues (from the museum collection) and a ledge with squat Tuscan columns, reminiscent of the architectural styles of the past. Exhibition galleries are characterized by restraint of form and color palette, while in the lobby, shop, aisles for the public and restaurant used bright, rich colors, as well as on the facade [15].

1.2 Examples of Loft Design with the Implementation of Stylistic Features of High-Tech Loft and high-tech office design are increasingly used by companies that want to stand out and emphasize their uniqueness. Loft and high-tech interiors can be found in advertising agencies, IT companies, design and architectural studios. Elements of industrial design, demonstrate openness of communications, which are used as decorative details. A combination of different textures and different styles of items with the minimum amount of furniture and a variety of the latest technical innovations [16]. Loft-style offices with high-tech elements use mostly an open way of organizing space, so zoning is necessary to create a working environment. Zones can be visually separated by means of transparent or opaque partitions, walls, and interior objects, such as office furniture (cases, racks, curbstones) that as used as a method of zoning. Traditionally, the reception area in the loft—office consists of a reception desk and seats for visitors. Special ingenuity of designers is required when separating the

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offices of management, although a simple brick wall in this case would be quite appropriate solution [17]. The design of the office in the style of the loft and high-tech forms the accepted style of the company, that expresses the image in every detail of the interior and considered an exclusive brand look. The design project of the office is the first step towards the implementation of corporate and commercial ideas. Today, interior design is especially popular for IT companies. After all, these companies often create unique and creative office space. For example, Google’s office has become very popular due to the creative approach, implementation of experiments, and sometimes quirky ideas. Arranging an office space for an IT company, provides a creative interior project, which perfectly fits the corporate style of the company in its exclusive design, and original approach to the employee workspace and, the creation of a unique image. It is much more important that the area designed for staff work and customer service be functional, comfortable, and inspiring to induce productive work. Specialized interior studios provide design services of any complexity of office space. A professional designer can easily design an exclusive interior design, taking into account all the wishes of the client, while adhering to the corporate traditions and spirit of the company and the specification and capabilities of the office space. When working with clients such as IT companies, only innovative technologies are usually used to create an office space according to all modern standards, whether it is minimalist style, high-tech, loft, or combine their style features in a single space. The main goal in any case is to create a unique room for the client, which will be comfortable to work. The loft style is close to high-tech, as evidenced by the large number of glass elements; however, the mixture of loft style and high-tech elements makes the interior unique and glass partitions are used to soften the roughness of its forms [18]. Loft-style in combination with high-tech designs is currently a current trend for office space, and this style is most popular with IT companies. The combination of loft and high-tech in the office must have a concrete or brick wall, which may be painted white, include restored wooden floor, ceiling beams, metal load-bearing structures, and visible communications features. All this is an integral part of this combination of styles. An important principle when decorating such a room and buying furniture is to combine the old and the new. A brick wall or a restored floor may be combined with glass, plastic and metal, which are typical features of high-tech style. Unusual designer sofas and abstract paintings together with an antique lamp or a table will perfectly fit into this loft and high-tech interior space producing a harmonious surrounding. Previously these styles were preferred by IT companies and advertising and design businesses. Today they are prolific in offices of companies from various fields. This is not surprising since these styles have special features—energy, dynamism, and functionality, but also, convenience and ergonomics. This provides a modern and sophisticated style that is important for the image of many companies. Currently, designers no longer seek to decorate the room strictly by the canons of high-tech or loft and are combined. Allowing for the presence of natural wood of

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different textures, plants, decorative design elements—paintings, various figurines, vases, furniture of various shapes is allowed [19]. An example is the office of a Finnish company that emanates light white space and color accents, and “Martela” furniture; incorporating the modern style of hightech and loft and taking a more comfortable form. The basic principles of high-tech have always followed a calm color base—white, gray, beige, black on which bright accents are emphasized. As a rule, it is recommended to choose one or two leading colors. As for the main color, today the clear leader is white [20]. The appeal of high-tech, devoid of decorative elements, is a combination of different textures, the play of light on the surfaces of glass, metal, and polished wood. Light is very important for hi-tech. Light pours into the room from huge windows on the whole wall. Apparently, the main rule—there should be lots of light.

1.3 Modern Trends in the Design of Functional Areas of IT Companies Interior design is a thoughtful organization of the interior space with the help of such factors as lighting, composition, color scheme, shape and size—all this creates a special environment, which should be comfortable and functional, and aesthetically pleasing. Today, office design attracts a lot of attention. This is a very important area, because unlike residential buildings, such a design should combine not only comfort and personal comfort, but also maximize the work of employees and meet all ergonomic requirements. At the moment, there are two main groups into which the actual design of the office is divided—American and European. These two groups are the most progressive leading approaches. “American” design is a dynamic space, the so-called Open Space, “pure” style, may combine partial “aggression”, which takes on the role of accent. The “European” style of office design also uses the idea of open space, but in combination with mixed styles, which provides softness, lightness and airiness of the interior [21]. Both design groups actively use all possible modern materials to decorate the environment: glass, various types of plastic and metals. Glass is especially popular with designers, because its properties open up almost unlimited possibilities! The glass itself provides a play of light in the room, making it transparent and light. In today’s world it is difficult to imagine an office without the use of glass; may be transparent light partitions, with a functional—decorative purpose. At one time, the appearance of such elements of decor caused a real sensation in the interiors of the office. Such partitions on the one hand divide the office into personal, separate workplaces or zones and at the same time unite the overall composition of the area, saving excessive segmentation of the space. They fully support the idea of open space, do not interfere with natural light, do not create tight corners, and at the same

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time help the working environment, provide psychological comfort to employees, maintain a sense of personal space, and individual security [22]. Glass partitions are presented in an incredibly wide range, there are mobile and stationary partitions, sliding, folding, deaf and swinging—many of them. There are various techniques of decor—such partitions can be matte, tinted (both fully and partially), decorated with various patterns or patterns, or classic—transparent. The uniqueness of the style is the maximum presentation of the character, features and corporate spirit of the company. The design of such a company should be expressive and bright; then it will attract customers who must understand at a glance that they are exactly where they wanted to be. But we should not forget about the areas of activity of firms. Institutions such as banks have their own—corporate style, for example, advertising agencies—their own modernism. Large windows should be displays, tables should be computers, and walls should be weightless transformers to ensure productivity. Well-known designer Karim Rashid once said: “As we live more and more in the virtual world, our physical world is gaining new meaning.” [23], Things that surround us every day are increasingly becoming objects of our excessive attention, they attract us, personalize us. In the future, these items will be technological, so high and low technologies will definitely combine. “Open space” is diverse, such a room can be transformed depending on the needs and purposes of its use. The only condition that remains unchanged is that all employees do not work in private offices, but in a common room, not divided by blank walls [24]. The European style, on the contrary, is characterized by separate offices for managers, meeting rooms or business meetings, a more democratic style of interior, without excessive rigor. The space of such an office is divided into zones due to partitions, such an interior is mobile and can change quite often due to the modules that move. This provides comfort and higher functionality. Unlike American hightech, Europeans choose more ergonomic offices—this is a priority for them. A variety of furniture, books, paintings, antiques, accents of corporate colors—all this gives ease and comfort. Examples of modern trends in the arrangement of functional areas are well-known IT companies around the world as: Microsoft Microsoft Corporation is one of the largest multinational software companies. The company was founded in 1975 by Bill Gates. As of 2015, the corporation’s turnover was $73.72 billion. The number of Microsoft employees in 2015 increased to 94,000—all of them are located in numerous offices of the corporation around the world. The geographic presence of Microsoft offices is 92 countries. There are 54 offices in the United States alone, including the company’s head office in Redmond, Washington. One of the last Microsoft offices was opened in Vienna (Austria). Its equipment and design were developed by the Austrian architectural firm INNOCAD Architecktur (headquartered in Graz, Austria). The cost of the work to create an office with an area of 4500 m2 amounted to 2.8 million euros.

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The design used bright “fresh” colors, mostly shades of green. In the office space there are a large number of themed rooms for meetings and negotiations—some of them look like an aquarium, where the walls, ceiling and floor are painted in shades of navy blue; and some resemble a hunting lodge decorated with wood. Workrooms and living rooms are not overloaded with small elements of decor—the design is limited to the play of light, contrast of materials, and whimsical furniture. The whole office is carpeted with light and dark green longitudinal stripes that seem endless. Office furniture—mostly white (Fig. 1). In the meeting rooms there are chairs with “leaky” backs and armrests, at the reception there is a chair for visitors in the form of sea shells. The whole interior is focused on a sense of innovation and advanced technology [25]. Google Google is a multinational public corporation headquartered in Mining View, California, USA. Founded in 1998, the company now invests in Internet search, advertising technology and a number of other Internet services and products. As of 2017, Google occupies 65.5% of the search engine market in the United States. The company’s turnover in 2016 amounted to $29.3 billion. Google is currently considered the leader in creating the most comfortable and creative workspaces for its employees. The company’s offices, which number 79 in 42 countries (19 of them are located in the United States), implement the principles of uniqueness, color and all-consuming convenience. None of Google’s offices is similar to the other, but they have common features: each has elements of national color (ranging from color to

Fig. 1 Microsoft office in Canada. Adapted from [26]

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Fig. 2 Google office in England. Adapted from [28]

country-specific decor elements). Many rooms are equipped with dance studios, gyms, massage rooms, conservatories, numerous “relaxation rooms”, swimming pools. The color content, is dominated by bright colors with various combinations. The main office areas, meeting rooms and conference rooms are more like rooms in a reality show, with colored wallpaper, soft walls and brightly painted furniture. One of the most striking examples of Google offices is the office in Zurich (Switzerland). Its area is 12,000 m2 , it is the largest development center of Google (Fig. 2). The design of the premises was created by the Swiss architectural firm Camenzind Evolution. The developed design concept was based on a psychological study of the team climate, which allowed the designers to focus on several fundamental points: • the workplace should resemble the usual living space; • the office must have “informal” rooms for meetings and negotiations; • public space should have entertainment elements, such as a slide with steep descents; • common areas and relax-rooms filled with upholstered furniture, amazing decor elements, decorated in bright colors [27]. Facebook Facebook is an American international Internet corporation that manages the social network Facebook. The network was founded in 2004 by Mark Zuckerberg, who is currently the president of Facebook. In 2011, the company’s turnover was $5 billion, and as of March 2016, Facebook had more than 3500 employees. The number of

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Facebook offices includes 11 facilities within the United States and 18 abroad. The corporation is headquartered in Menlo Park (California, USA). The interior design of the former head office (in Palo Alto), which covers an area of 14,000 m2 , was developed by the American studio “Pro + A”. On two floors there are working rooms and rooms for rest and negotiations. As the office employs people of different nationalities, the main task of the designers was to create a multinational atmosphere that would unite the company’s employees. Wide spaces for working provides access to each employee, with manager’s spaces located in the central areas. Large lounges are also designed for employees to spend time together. The office has one large and several small kitchens, which are opened to employees around the clock. It is worth noting that the Facebook office in Palo Alto became the first commercial project implemented in the “Green Building Ordinance”. According to this document, reusable materials, secondary joinery, etc. were used in the design and decor of the premises. Of particular note are carpets made from recycled materials and energysaving lighting. Many walls of the office have remained “bare,” where office workers may use them for notes and their own drawings. Many of Facebook’s offices are industrial in nature, expressed in engineering systems—pipes, beams, and metal structures that run along and across the ceiling (Fig. 3). An orange industrial crane, left by the previous developer and turned into an art object by sculptor Oliver DiCicco, is installed in one of the rooms [29].

Fig. 3 Facebook office in USA. Adapted from [30]

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Skype Skype is an IT company that develops Skype voicemail software and service. It was founded in 2003 and acquired by Microsoft in 2011. Skype is headquartered in Luxembourg (Luxembourg), with six (6) more offices in London (UK, marketing support), Stockholm (Sweden, technical support), Tallinn, Tartu (both Estonia, technical support development), Prague (Czech Republic), and Palo Alto (USA). As of 2015, the company’s turnover was $812 million, and the number of employees reached 800 people. The most colorful of all Skype offices is the office in Stockholm, which was worked on in 2011 by the Swedish architectural firm Arkitektur (headquartered in Stockholm). The office space is 1680 m2 , which should accommodate more than 100 Skype employees. The interior design of the office reflects the philosophy and spirit of Skype—it’s playfulness and functionality. To achieve this effect, the designers used triangular and diamond-shapes, to shape furniture (including desks) and carpets; large numbers of soft sofas and ottomans, with rounded shapes and bright colors that look like large colored spots on a background of white and gray shades of living spaces. Each room has its own predominant color—it can be bright blue, green, orange or pink. It is noteworthy that the designers did not set the goal of turning the living space into a colorful “Disneyland; characterized by room with white or gray shades of walls and ceilings, decorated with bright furniture, and rooms with colored paint dominated by white furniture. Among the elements of décor is purely technical things—decorated cables, wires, sockets and plugs, painted or hanging from the walls. Thus, the designers expressed the functional purpose of the Stockholm office, namely—to provide technical support for audio and video services. The Skype logo, which is a cloud, is embodied in spherical light bulbs, in large numbers hanging from the ceiling (Fig. 4). The main technical feature of the office is good acoustics, which was achieved by upholstering the walls with sound-absorbing materials. Such conditions are necessary for working with audio and video service, which are carried out in the Stockholm office of Skype [31].

2 Theoretical Provisions of the Combination of Stylish and Constructive Features of the Loft and High-Tech 2.1 Compositional and Constructive Characteristics of the Design in the Loft Style Loft-style office design is increasingly used by companies that want to stand out and emphasize their uniqueness. Loft-style interiors can be found in advertising agencies, IT companies, design and architectural studios. The office is a great opportunity to create a multifunctional comfortable space for work, an open environment for exchanging ideas, and for rest and relaxation. This design is actively used by various coworking centers, as well as other similar organizations. The interior of the loft-style

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Fig. 4 Skype office in Sweden. Adapted from [32]

office combines the old (brick walls, stairs, pipes, uncovered ventilation systems, factory fixtures) and something modern (new technology, metal and mirrors) in one interior [33]. The traditional loft-style interior is a large open space with brick walls, concrete and/or natural flooring, minimal furniture, bright accessories and modern appliances. Modern designers divide the loft into several areas: • Bohemian is a direction in which the features of a classic factory building are completely preserved. However, furniture and accessories are selected with the inherent creativity of ingenious individuals. Here, new design solutions are combined with old, worn, as if accidentally found in the trash interior items. Displayed in a playful and free atmosphere, that may not combine at all. Mostly these are avant-garde paintings, sculptures, ikebana, and musical instruments [34]. • Glamorous. The so-called glamorous loft stands out with a unique color palette. Fans of such an interior, choose an unconventional combination of pastel shades of spectral colors. For example, it can be gray-brown or gray-purple. Particular attention is paid to the decor—lamps, chandeliers, lampshades, LED lights, and floor lamps. The highlight of this space can also be baroque mirrors, large plants in concrete pots and skins on the floor [35]. • Industrial (industrial). This is the most popular direction of loft in interior design. To embody it in a living space, whether it is an apartment or a country house, it is necessary to create the atmosphere of a production building or a factory shop. To

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do this, metal structures are used, ventilation pipes, wooden trusses, and wires. The furniture is as functional as possible, with the correct geometric shapes. The loft is ideal for lovers of space, air, and natural light. Understandably, not everyone has access to completely open housing planning; however, it is possible to add the main elements of this attic style to almost any space [36]. Characteristic elements and accessories Integral attributes are: rough brickwork, the use of pipes, fittings or untreated plaster. All this, in the vicinity of traditional finishing materials, emphasize accents and evidence of the originality of the style. The industrial atmosphere seems to come into the living space, giving it new opportunities and forcing it to play with new colors. One of the main features of the style is its industry. This style “gets used” well in rooms with huge windows. In addition to natural light, fluorescent lamps are used. Brand touch—suspended on cables to the untreated ceiling office fluorescent lamps. Lighting and windows The windows are not covered with curtains, and be as large as possible, to the floor, and give a lot of light. Natural wood is also actively used—frames, trim, doors, baseboards (but mostly painted in the colors of the entire interior). Lighting is performed mainly by technical floodlights, overhead lamps with open wiring, pendant lamps of simple shapes, and resemble factory light sources. Concealed backlighting with LED strips is actively used. Color solution The best urban color scheme is moderate gray and brown tones in combination with white. The same scale should be followed for each situation. Accessories of bright shades—red, blue, yellow bring variety. These can be sofa cushions, lampshades or small pieces of furniture. The most important requirement for such accents is to complement, but not interrupt the overall industrial sound of the style. Furniture The furniture, which corresponds to the loft style, uses clear and simple outlines, with different effects that mimic the industrial origin of this style—shabby leather or wood, rusty metal, peeling paint, rough textures. Previously, metal furniture was associated exclusively with industrial furniture: cabinets, shelves, locksmith tables, etc. Now such furniture is popular and largely due to modern loft and high-tech styles. The main features of the room in the combination of loft styles with high-tech elements are the furniture that is simple and functional. This style is impressed by open planning, large windows, minimal decor, industrial interior features. Loft-style furniture with high-tech elements play an important role, and they also perform another function— zoning the room. Furniture in this style can be almost any type, but the most beautiful look is a combination of classic details and modern minimalist elements. Furniture has traditionally been made of wood, but modern technologies of welding, cutting,

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and painting metal. Metal furniture has many advantages: Metal is much stronger than wood or plastic and able to withstand heavy loads. This is especially important for public places where the furniture is used extensively number of people. Metal furniture is less prone to shocks and mechanical impacts. Metal furniture is not threatened by drying, they are not prone to rot, scratches are easily removed, and are not afraid of moisture. The duration of use of such furniture is much longer, especially when it comes to opening various doors and drawers. Furniture can be lighter and more comfortable than wooden. Metal furniture is also easy to make collapsible. Any high-tech furniture looks modern and stylish. This furniture is in harmony with modern appliances and decorative elements. Loft or high-tech furniture can be made entirely of metal or include some detail, such as elegant legs of sofas or armchairs. The use of metal furniture in the interior is quite large: coffee tables, cabinets, hangers, chairs, beds, screens, shelves, kitchens, etc. In the manufacture of metal furniture, there are a number of technological features that achieve high quality. When welding metal, due to the uneven heating there are deformations of the product. Therefore, use special devices and a conductor to avoid this disadvantage. All this requires careful cleaning and processing of the metal before painting. Polymeric painting allows for a qualitative covering of any color, shade and texture on the furniture surface. In addition, such furniture is lighter and more convenient to disassemble and functional. Such furniture as an interior decoration, emphasize taste and modernity [37]. Materials (floor, walls, ceiling) The list of typical materials for the loft style is significant—there are concrete, brick, and white walls next to wooden floors, and glass, with chrome details. The main stylistic solution is the contrast of untreated building materials with elegant modern surfaces. Non-plastered brickwork is the most common element of the loft style, by which it is distinctively recognized. Due to the considerable scale of this style, the masonry today is perceived not as a construction defect, but as an integral and even cozy component of the interior. Ideas Zoning of space is carried out by means of glass partitions or a special arrangement of furniture. Loft democratically accepts a combination of old or artificially obsolete objects with new, ultra-modern ones. This style has a somewhat spontaneous, incomplete character, so thoughtful furniture sets and excessive uniformity are not in his favor. The right move is to collect several different objects, combining them into a single decor. Untreated walls In the industrial architecture of the Industrial Revolution (mid-nineteenth—early twentieth century) quite a few well-known features, the first material—red brick, which was left unplastered, both outside and inside the shops. Artists who inhabited the former shops, they were not up to leveling and painting the walls, it was just about “mastering” the premises of a hundred square meters in the complete absence of funds. After gentrification, or “refinement” of the loft, this untreated wall could

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be easily abandoned, but it has already become part of the “legend” and has become the most iconic feature of the style and where walls do not have to be brick. If a building with concrete walls was rebuilt into a loft, then concrete, preferably rough and with traces of formwork, is suitable as an “authentic feature”. As a rule, one or two untreated walls are enough, in particular, inter-apartment partitions have the full right to be plastered. Open communications Another sign of the lack of a classic “repair” in the loft are open views of the communication features, which in other living spaces are traditionally hidden in the walls or according to user preferences. It is clear that at first it was accepted by the majority. And it is known as the wire inside the non-mail wall. In a modern loft, a beautifully diluted surface of the conductor wall or branched over the head of massive chrome-plated boxes of air ducts are perceived as “special chic” [38, 39].

2.2 Stages of Formation of High-Tech Style and Integration into Other Styles There are many styles of interior design in which there is integrated high-tech style, and if the styles of the past are so individual that it is difficult to err in their affiliation, the interiors of modern days are largely similar. Hi-tech style perfectly integrated in such areas as minimalism, constructivism, and loft. Constructivism emerged in our country in the early twentieth century. This trend first appears in architecture, and then captures other fields of art, such as interior design and even the “younger sister of architecture”—furniture. The main feature of this style lies in its name. That is, furniture in the style of constructivism is not burdened with anything extra, it is a bare structure, without unnecessary decor. Constructivism in the interior is also manifested in the absence of everything superfluous, such as internal partitions, as there should be no secrets in the new society. But life in a single space is not comfortable and to somehow improve this situation, constructivism took a touch of hi-tech, then began to use a variety of partitions, which immediately became fashionable. To achieve harmony, carefully thought out the details of the interior. The main accents, and sometimes the only ones, are colors, their contrasting combinations and graphic shapes. Bright red details are characteristic of this style, as well as sharp corners, concrete walls, rectangular columns, beveled lines. Red is often combined with gray. Gray can be replaced by metal, a fairly common phenomenon for interiors in the style of constructivism in combination with high-tech. Constructivism is a rather revolutionary style that has shattered many stereotypes. But in terms of comfort, it proved to be impractical and was supplanted by more functional items. Meanwhile, it was constructivism that gave rise to popular modern trends, such as high-tech, techno, minimalism, industrial and loft, and others.

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Hi-tech has also been integrated into minimalism, which is characterized by conciseness, but even the simplest subject has its own unique value and high functionality. Transformed and built-in furniture items are used in the interior. Interiors in a minimalist style are distinguished by their rigor, purity, straight lines, simple shapes. The emphasis is usually on the open space, masking all the details. More attention is paid to surface treatment and harmonious combination of parts. Traditional decor is absent, as well as textiles. Great importance in minimalism is given to lighting. The most significant interior items are illuminated with floor lamps and table lamps. There are huge windows and solid walls of restrained colors, especially the characteristic pastel tones. Few people cleverly place color accents. High-tech style harmonizes perfectly with minimalism. Mandatory elements are glass, metal, chrome surfaces. This direction came into architecture from industrial design and still retains all the characteristic features—open fittings, air ducts, communication pipes. Although today, designers often reproduce such elements, using lighter and more comfortable materials in the interior, imitating real metal. From the outside, hitech looks undecorated and restrained, but has functionality and comfort through the use of advanced technologies. The presence of modern technologies, space, geometry of objects, proper lighting, sliding door wardrobes, the use of chrome pipes, non-standard furniture—all this distinguishes high-tech from other styles. Usually similar colors are used for wall decoration and furniture. The easiest way to reproduce high-tech in the kitchen or bathroom, is the inclusion of a large number of appliances with metal, chrome, and shiny surfaces. Each area is unique, but has no precise restrictions, and rarely use one style in its “pure” form. Accordingly, all three areas do not contradict each other, and therefore are often used together. Modern designers create beautiful interiors, having the characteristics of each style [40]. Types of high-tech style Industrial high-tech On the basis of industrial elements “Industrial high-tech” was founded. Typical elements of industrial hi-tech were usually metal and glass parts, as well as pipes and fittings, various rivets and jumpers. These elements are used to simulate the interior of a factory or plant. This approach to creating an interior reminds us of the “loft” style, which on the contrary was transformed from factories and plants into an office or living space. Therefore, this type of high-tech is often combined with a loft. Examples of industrial high-tech were presented by famous masters such as Piano et al. [41]. Geometric high-tech Geometric high-tech added a cult of form to the cult of iron and glass. For this purpose, complex architectural designs are created, the newest technologies are used. Progressive architectural solutions are the basis of all buildings, built on the principle of geometric high-tech style. Geometric high-tech was created on the basis of constructions and complex shapes. Also, included spatial shells on rods consisting of tensile cables. An example of this design is the Sydney Tower, which is 304.8 m

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high or 1000 ft. This building was built by architect Donald Kron and engineer W. Chapman in August, 1981. This style in the modern direction has become the most widespread in the design of high-tech style. The geometric style of hi-tech is characterized by the search for novelty of load-bearing system structures in the construction of a complex system and the latest materials and structural elements. The most modern load-bearing structures must be based on one point. • the image of past tectonic structures worked on pressure, tectonics of stacked and stacked construction elements; • the image of modern tectonic structures usually works in tension. There are two types of structures: air-resistant and pneumatic. The air-resistant structure is a shell of enormous size, which forms a large structure. Pneumatic structures in contrast to air-resistant, are not whole houses, but only its structural elements—pneumatic rods (beams, racks, arches, frames) and panels [42]. Bio-tech This style originated at a time when engineers were trying to find answers to complex technical problems and sought help from natural forms. The first notes of bionics we can see in the works of Leonardo da Vinci—watching birds, he created aircraft. But when did bio-tech take root in architecture? It is said that this interior was once created by British architect Frank Lloyd Wright in the middle of the XX century. Frank was convinced that furniture should be similar to a living organism. According to him, bionics should combine art, religion, science and nature. The formation of bio-tech as an architectural style dates back to the end of the XX century, but to this day continues to develop. Bionic high-tech direction of modern architecture, which repeats the features of natural forms. Bionic high-tech not only repeats the forms that exist in nature, but tries to predict the functional calculation and features of living organisms. Bionic architecture does not conflict with nature, but becomes a logical continuation. Bio-tech also pays attention to new ideas of construction technology. Promising developments are waste-free construction technologies. The idea itself was created on the principle of deep-sea mollusks. Soft and hard plates alternate in strong shells of mollusks. When the hard plate cracks, the deformation is absorbed by the soft layer and the crack does not go further. Bionic architecture in its further development seeks to create an Eco-house— energy-efficient and comfortable homes with independent life support systems. The design of such a structure provides a set of engineering equipment. Buildings prefer solar panels and collectors that collect rainwater. Landscaping terraces are also being built and natural lighting and ventilation predominate. Only environmentally friendly materials and building structures are used during construction. Ideally, the house of the future is an autonomous self-sufficient system that organically fits into the natural landscape and exists in harmony with nature. Bionic style is equivalent in content to the concept of eco-architecture and is directly related to ecology [43].

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Slick—tech The architecture of “open spaces”, “slick—tech”—these are the basic principles of formation in the postmodern direction of technology. With the help of these objective means of architectural composition, the authors convey a certain creative concept, reveals the semantics of the works, its ideological content. In many ways, it is these conceptual techniques that determine the factor of democracy in the philosophy of modern high-tech architecture. Such combinations give the necessary individual character to buildings, which are often based on a rather trivial three-dimensional shape. There are three examples of very famous modern buildings, the composition of which is based on the shape of a glass cylinder: a trading house on Sq. St. Stephen’s in Vienna, the complex “Am-Ufer”—the Ministry of Internal Affairs of Germany in Berlin, the Bastille Opera in Paris. In the first case—the glass cylinders of the trading halls grow from a stepped base formed by reinforced concrete panels “per room”. In the second case, the plans of the building from the radically reconstructed old brick object overlook the embankment of the Spree River with two high-rise glass cylinders, girded at the mark of two thirds of the foundation with a three-story “binding” with brick cladding, which connects new shapes with texture historic old brick part of the building. Finally, in the third case—the bluish-green main glass cylindrical volume of the theater building, the sloping section hung with ledges and white opaque panels with stone cladding [44]. High-tech constructions in combination with historical buildings The formation of the urban environment is the work of many centuries and generations. Through the work of many generations, it grew and developed, was filled with new architectural masterpieces and the characteristic style of cities was formed, and peculiar silhouette emerged. Inevitably, there is an opposition of the new to the old, often the new states its position in the form of a sharp denial of history. But our past cannot be completely forgotten or erased, because without knowledge of history our future is impossible. Of course, time makes its adjustments, there are new needs of people, the need to build certain types of houses, but historic buildings, and even more so architectural monuments, must remain the main criterion of exemplary design of new urban environments. The combination of high-tech and old buildings should be very organic. Successful interaction of neighboring buildings will only emphasize the advantages and features of each other. However, it is not always possible to harmoniously fit the new into the existing historical building, without violating its unique integrity. An example of “fitting” a new object into the environment in the city of Vienna can be considered a small office building, located on one of the streets of the city with historic buildings of the second half of the nineteenth century. With the high pace of modern construction, it is very important to preserve existing historic buildings. The formation of characteristic external features of the object was influenced by the factor of architectural tradition. Even in the architecture of the early twentieth century there was a tendency to oppose two styles: classicism and constructivism, in turn, the latter influenced the creation of high-tech style. Development of constructivism on the basis of innovative

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technologies, use of continuous glazing, metal and plastic, demonstration of work of designs, application of technological elements, all this is characteristic of high-tech style. In recent decades, the names of outstanding masters of high-tech style have been opened to world architecture: Norman Foster, Kenzo Tange, Richard Rogers, Renzo Piano, Santiago Calatrava, Frank Gary and many others. Their influence affects the work of both foreign and Ukrainian architects. Therefore, it is not surprising that more and more often in the cities of Ukraine there are buildings built under the influence of high-tech style. But when designing modern forms, architects must strive to preserve historic buildings. Preservation can be achieved by a reasonable intrusion of new objects into the historical environment, both on the basis of mortgage and contrast to the environment. In this case, the object contrasts with the surrounding historic buildings, and this is a stylistic contrast. The analyzed object is built under the influence of high-tech style, and, under the influence of geometric variety, based on the creation of complex shapes and proportions, on clear geometric constructions. The object differs in the dynamics of the forms directed upwards, its bold plasticity, and geometry of the composition. On the facades, straight and plastic lines interact. On the rear facade, the horizontal and vertical lines are folded into a rigid laconic geometric composition, and the visual accent is a metal arc running along the entire facade. On this facade, an attempt to identify the load-bearing elements of the object (floor slabs) is noticeable. Thus, it can be noted that the high-tech style is much more pronounced on the rear facade. This decision was influenced by historic buildings, which is crucial in the design of the main facade of the object, but does not affect the formation of the rear facade, clearly wins in style and better to fit the object into the environment. On the main facade, the architect designed a small extension to the object, considering the proportions of the surrounding historic buildings. Thus, the style of postmodernism can be noted in the object. There is an attempt by the designer to find ways to interact with historic buildings. However, the main facade could not become structured and harmonious, which distinguishes the rear facade. The stylistic contrast was manifested in the fact that in the environment of eclectic buildings there was an object built in accordance with the principles of high-tech style. The object is contrasting not only in relation to the surrounding buildings, but also in relation to their own volumes, the direction of movement of the facade lines, color solutions—silver-metal and blue cold elements are combined with warm beige and brown. However, it would be wrong to mechanically transfer to new objects old forms and techniques, so modern advances in construction techniques allow them to creatively develop creating buildings on the one hand, different from the individual, and on the other hand harmonize with the historical environment. The object is definitely individual, this external uniqueness of the building was achieved through the use of dynamic shapes and lines of different materials, colors and textures. But in reality, it is very difficult to assess this object on a historic street and among the mansions of the second half of the nineteenth century. We can assume that when designing this object, the architect was more guided by his vision of “beauty”, demonstrating their architectural principles, rather than given the artistic face of the surrounding historic buildings. The new office building could not

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become a harmonious part of the historic building. The point is not that the method of contrast was chosen when installing a new house, but that the bright expressiveness of the building achieved by this contrast is not sufficiently consistent with the historic mansion. Therefore, it must be remembered that the expressiveness of the new building can be achieved not only by contrast, but also by individual details, that is “fitting” into the situation of the environment. In this case, it is not necessary to “fit” individual extensions by the method of details using the principle of “stylization”, and the main part of the object—by the method of contrast (which happened in this object) [45].

2.3 Ways of Symbiosis of High-Tech Compositions in Loft Design Constructive expression of tectonics as a form of existing structures by means of hi-tech. Hi-tech inherited these techniques, significant developments that have enriched them. In addition to the development and use of load-bearing structures—frames, trusses, as well as various frames—began to use combined systems of rigid and cable elements, with the active use of the latter as a separate tool. But the main distinguishing feature of the high-tech solution were the load-bearing structures using the basic elements of the closed section. Vertical bearing pipes as part of a building in Munich (architects V. and B. Bertz), a kind of stable and suspended structural system. Among the general methods of compositions were the interpretation of the size of sections, the cumbersomeness of structures and nodes, and their actions, the excessive number and intersection of diagonal cross-fields, and so on. All this happened for reasons that emphasized the “technicality.” But the most important modernization of the appearance of buildings, their silhouette, color and texture of facades, which contributed to progress in the solution and application of metal external enclosing structures, is characterized by high-tech high. It is these techniques that most strongly emphasize the specifics of the type of buildings made in this style. A classic example of this can be found in the Berlin Congress. The silhouette of the building resembles the appearance of a ship, which was technically possible due to the use of aluminum exterior walls and original light transmissions resembling the windows of ships. The tendency to play, grotesque and technical exaggerations of the size of loadbearing structures was reflected in the Congress Hall. Longitudinal diaphragm trusses, the design of which is designed to perceive the dissipation of the composite coating, is clearly exaggerated by the height and cross section of the elements [46].

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Introduction of functional high-tech style equipment in the functional areas of loft spaces. Literally every year it dictates new quality standards of living, which few people manage to stay away from. On the one hand, technological progress clearly affects people, making them dependent on inventions and unable to independently act and think. On the other hand, new digital designs bring convenience to life, as well as significantly reduce the time to solve various tasks in everyday life, work, study, etc. When using modern technologies in interior design, in addition to practical benefits, it is necessary to consider the aesthetics of space, as well as the importance of the atmosphere and psychological comfort of the place where a person spends most of his life. In the past, office buildings were not very different from residential ones, and office equipment was reduced to a typewriter and a telephone. With the development of information technology, not only has the range of office equipment increased, but there are also problems associated with the device of electrical wiring, increasing the thermal load on the premises, the need to zone air conditioning systems. The spatial decision of the office is greatly influenced by the chosen scheme of wiring electricity and computer network. In order to hide the wires, it is enough to spread them inside the drywall partition. However, the wires need access, so there are solutions such as wall boxes. Placement of wires in walls or wall boxes is possible in traditional offices of office type or as a part of the combined wiring system. Regardless of the field of activity, the daily work process is accompanied by meetings, negotiations and plans, which are organized by high-tech solutions for the office, which include multimedia equipment: • wireless, analog, and digital congress systems with functions of logging and simultaneous translation; • projectors and screens for demonstration of graphic material and video; • sliding monitors, optimal for small rooms; presentation systems, overhead projectors, flip charts, magnetic boards, and document cameras; • video walls and displays with the automated control system and accessories for reliable fastening to any types of surfaces. • professional acoustics, microphones and radio equipment; • control and switching systems; interactive panels, boards, displays and voting systems. The greatest development in interior design was the advanced technology of human interaction with living space called “Smart Home”. This system of sensors independently recognizes a situation in the house and reacts to it according to certain algorithms. A number of teams regulate the operation of all engineering systems in accordance with the wishes of the owner of the house, time of day, weather, outdoor lighting, etc., provides a comfortable condition inside the house [47].

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The use of high-tech decor in the design of loft premises. The style of high-tech interior design in the loft spaces was positioned on the exposure of structural components of engineering systems and household equipment. Any fasteners, nails, screws, rivets, and so on were considered decorative ornaments. Technical communications and bare metal frames are just a plus for this style. Exhibited fittings, pipes, elevators and mines, air ducts, ventilation parts, trusses, beams, cables and everything else—this is also an integral part of this design. Today it is not necessary, in the modern high-tech style some other prerogatives. There are only high technologies and a minimum of scenery. And only natural materials: wood, metal, glass, concrete and natural stone. Sometimes it is expensive, but provided that there are almost no extra things, accessories and other elements—it is not very difficult, but very high quality. Leather is also used here—it is better to cover the furniture with genuine leather, if you plan to decorate the interior in a high-tech style in the spaces of the building in the loft style. Hi-tech style does not accept any curtains or wallpaper with mercantile patterns. This style does not like complicated finishing. It is characterized by strict straight lines. Modern style for small high-tech rooms is suitable with a very large stretch, it is better to design it in large elevator rooms, which can be clearly zoned. At the same time not only methods of lighting, but also glass partitions, screens and doors are used. There are almost no chests of drawers and wardrobes in high-tech, they do not fit into the overall concept. As for walls and other surfaces with relatively large planes, they should preferably be in the same tone, without sharp differences, and color mixtures. Colors should be white or beige, light gray, or sand. Bare walls are decorated in a modern way, with abstract paintings, modern fashion photos in frames, collages in metal and so on. On a floor as a covering it is possible to use monophonic carpets or carpets, the strip or a carpet with big long pile will look good for rooms in technogenic style. As an accessory or decorative decoration of high-tech interior, a large aquarium with exotic fish is perfect. The furniture should be functional, practical and natural, made only of quality materials and in accordance with strict lines. No ruffles, curved large backs and armrests and other things that may even remotely resemble a soft classic. Such furniture is more suitable for the office than for interior items that are designed for leisure in your free time. Upholstered furniture should be selected only the simplest forms, complex geometry is completely unnecessary. The upholstery should be only solid. Curtains are preferably of medium density, and tulle or opaque curtains are not perceived at all. Proponents of the new style of high-tech are very practical for lighting, including the zonal division of the premises with lighting—a variety of lighting fixtures, lamps, floor lamps sconces. Luminaires on lighting fixtures are not allowed pendants in the form of crystal pendants, various flashlights, massive and pompous chandeliers. Luminaires should be ascetic, but made in the general concept of high technology. You can use recessed luminaires or the latest halogen lamps, spotlights, LED lighting and so on. And it

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is more desirable to use all devices in a complex, multilevel format. String lamps and various tension lighting devices will model the space perfectly and approach a high-tech design [48]. The combination of color, texture, and shape of the material of geometric high-tech in the design of loft premises. Due to the specifics of the style, high-tech is not suitable for all types of living spaces. In a loft-style room, the style reveals its best qualities. Strict geometry of simple forms, high functionality, and well-thought-out layout; industrial aesthetics of the modern enterprise of high technologies—so it is possible to characterize hightech style. Indeed, this high-tech interior, with its conciseness and lack of unnecessary details is suitable for loft-style rooms. The minimum level of decorative design is offset by the harmony of shapes and lines, and emphasizes this unusual aesthetics of the play of light on the surfaces of furniture and appliances. Plastic, glass, chrome or enameled metal, ceramic tiles or self-leveling floors—they all have varying degrees of gloss and allow the interior to beat the play of light and shade no less effectively than color combinations. Natural and artificial lighting plays an important role in this. The lamps themselves can be of different shapes. Hi-tech is considered the highest stage of development of modernism in the interior. It does not accept soft or pastel halftones. The palette of finishing materials, furniture and appliances is based on three main colors: white, black and gray (or silver). It is in these colors that home appliance manufacturers “paint” the front panels of most of their products. And since the office has high-tech style elements, it uses mostly built-in appliances and the furniture has either plastic facades or deaf facades made of MDF covered with enamel. Countertops are used with edging at right angles, this is the technology of applying the edge with a laser. Positioning of the revealed special things of characteristic lofts and designs has the operating data in existing objects. Today, loft-style design with high-tech elements is very popular and used everywhere. In most cases, this option is chosen by owners of penthouses and private homes outside the city. Designers use special avant-garde and industrial design options for such premises. Buildings and rooms with huge, high ceilings are more suitable for a loft. This style has several directions: 1. 2. 3.

4.

This is a strict option. The design of the room is already made in this style, producing a modern residence. Soft option. For the soft version, “naked” buildings are used, which were recently erected, but built in a loft style. Commercial option. This is the use of abandoned factories, industrial buildings that have been closed and have high ceilings of 5 m, which is ideal for this style. This option is used for business ideas. Life option. In this case, the finished room is converted into a residential building in a loft style.

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What are the characteristics of this style? Loft style, has its own characteristics, without which it is unlikely to live up to its name. First, is the location of the building. Abandoned plants and factories are best suited for the loft. It is there that office space is located without partitions, with an open view and a large field for imagination. Details play a very important role here. It can be open ventilation, completely bare walls, rough finishes, details from the old life, all this is necessary to embody a special spirit—loft structures. Special loft-style fences can also be used. The main points characteristic of such premises: • • • • • •

inconspicuous, rough colors; use of strict vertical and horizontal lines; large open space, as well as a clear geometry of the shapes of the room; features of a decor, various beams, columns, restrained style of registration; window models must be rectangular; the door is the simplest, without excesses in classical style [49, 50].

3 Provisions of Implementation of Loft and High-Tech Symbiosis in Design of Functional Zones of It Company 3.1 General Requirements for the Design of Interior Spaces for IT Companies Ergonomics of office premises is the priority over geometry of space of these workplaces. Experts have long concluded that productivity is directly dependent on the degree of comfort and convenience of each employee. In addition, the correct distribution of space helps to avoid unnecessary loss of working time for work related relocation and greatly facilitates the management of the team. It also helps to increase discipline on the ground and increases productivity. Therefore, experienced company executives are trying to ergonomically transform the office space. Many factors are considered, lighting, the convenience of eyeliner communications (telephone and Internet), the geometry of space, comfort, and more. The basis of rational planning of office space—the division into work zones, create the most comfortable working conditions for employees, both as a team and independently. There are three types of organization of office space: • closed; • open; • combined. When choosing one of the three types consideration is given to the number of employees, their specific activities, interaction between employees, the flow and movement of customers, or group work of employees, and where individuals work. Members of groups responsible for one case should not be in different offices. Conversely, unrelated departments are not placed in a common room. Office space

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(closed) type does not allow efficient use of available space and requires higher costs for repairs and cleaning. This type of division of space is required in government agencies and companies where employees perform individual tasks or in small groups: financial and analytical companies, design bureaus, and law firms, etc. Office Ergonomics—Open Office Planning Open offices are best for IT companies, architectural and design offices. The “open space” system allows not only to solve work processes, but also provides savings on air conditioning, electricity, and other technical communications. Cleaning does not cause problems in these settings. The modular organization of the office allows you to adjust the number of seats, by adding or removing seats as needed. Separation of workplaces by partitions or racks allows the use of the available area with the maximum efficiency, allowing control by management. The shortcomings of the ergonomics of the workplace in a modern office, organized in an open type should be considered. The desire to make the most of a space can lead to inconvenience, so the distance between the shelves should be calculated based on the operating conditions of a particular company. Similarly, a significant number of people in one room creates noise and can cause problems of visual isolation—to distract a person from work. As such, the combined type is frequently used. In this case, separate offices are allocated for the IT company and the management staff, and regular employees are placed in partitions divided into zones in the common room. The main principle of workplace organization is the minimization of load, convenience, and comfort. Characteristics of workplace ergonomics are determined by psychological, physiological, and anthropometric requirements. Accordingly, the following is considered: • working posture; the ability to cover the movements and gaze of the entire space and the objects located on it; • the space in which the employee is placed; • the ability to work with equipment, recordings, placement of necessary materials. Characteristics of the workplace of the IT specialist must comply with certain rules and consider: anthropometric compatibility—compliance with the size of the body and its position at work; sensorimotor compatibility—speed of motor operations; energy compatibility—efforts made to perform actions; psychophysiological compatibility—a reaction to external aesthetic parameters. At the same time, one of the most important tasks is the selection of tables and chairs. Ergonomics of the workplace with a personal computer. If the requirements for the seats are—comfortable seating, which can be provided by armrests, adjustable backrest and the degree of mobility, which is determined by the nature of work, the ergonomics of the desktop is largely determined by the speed of work. Ergonomics itself is recognized by the angular curved shape of the tabletop. But with a L-shape or too smooth rounding, the employee is forced to reach for the papers. In addition, it is necessary to provide various stands, trays and add-ons that provide work on the principle of “everything at hand” to eliminate unnecessary costs [51].

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In addition, there is now virtually no office worker who does not use a computer constantly. Therefore, whether it is the ergonomics of the workplace of an IT specialist, manager or middle manager, it must consider the convenience of human– machine interaction. Computer ergonomics in addition to the shape and dimensions of furniture, the location of the person in relation to technology and placement of the keyboard, monitor and other parts of the workflow, computer ergonomics must consider the size and shape of all areas of achievement. Keyboard ergonomics key height—two standards are available: “slim” and standard. In the first case, the keys have less stroke and require softer pressure. They are convenient when typing large volumes, as less stress on the hands. If the employee has vision problems, the standard larger keys may be more convenient for him. Layout— Some manufacturers change the position of the function keys. This is inconvenient and reduces productivity due to the fact that the employee has to relearn or correct errors that occur due to the use of other combinations. This factor should be considered when choosing. There are keyboards made in an unusual (for example, angular) shape. Such changes may reduce the efficiency of work and lead to hand fatigue. Pressing volume is an important aspect. The noise caused by the keys disturbs the employee himself, and even more the employees who are nearby. And when several people work together, such sounds can significantly affect the comfort of the team. The sound should be as quiet as possible. Color—despite the fact that most keyboards are available in black with white letters, the opposite is more convenient for permanent work: black characters on a white background. This combination puts less strain on the lens and does not cause eye fatigue. Another detail to pay attention to is the durability of the paint. If it wears off over time, the employee will feel uncomfortable when searching, and this will affect the outcomes of the tasks. Kosonen and Tan suggest microclimate affects employees’ productivity [52]. They claim that a room temperature of 27 °C has a 30% lower productivity compared to 21 °C. Climate research has shown that there is no single indicator of indoor temperature comfort. For example, a comfortable room temperature depends on the outside air temperature. In the northern hemisphere, higher room temperatures are better in summer than in winter. The level of thermal perception is not in one season. People who live or work in naturally ventilated buildings, where they can open windows, get used to the temperature diversity. Their temperature perception develops in a wider range, which is better. To simplify, people get accustomed to a wider range of temperatures and thus expand their comfort zone. Thermal comfort depends on age. Older people have a smaller range of comfortable indoor temperatures than young people. Perhaps the most important piece of advice is that people should be able to control the temperature changes in the room, which means the possibility of opening a window or locally adapting the temperature with a thermostat. Temperature is not the only significant factor in office space. High concentrations of carbon dioxide significantly reduce the efficiency of the decision-making process, but sound and light are also important. Concentration on a task is reduced by 7% in the presence of strong ambient noise. To solve complex problems requires light, you should also avoid glare, it reduces productivity. In addition, landscapes of green plants have a positive effect on creativity, which is a form of productivity, although for some types

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of monotonous office work there has been a 12% decrease in productivity for places overlooking plants [53].

3.2 Types of Integration Zones of Functional Spaces of IT Companies A modern office, with its technology, high level of cooperation, project teams of employees from several departments, is hard to imagine being separated by impenetrable walls. The new style of work requires transparency, the possibility of rapid change, and flexibility of space. Walls, in many offices and continuous corridors are rapidly disappearing from business centers. But the need for silence, individual space, is still necessary for the work of separate areas of the office—reception, meeting, rest areas and offices—has not disappeared. Not always such a device of office space as “open space” in its pure form is the optimal solution for the company. The choice in favor of open or closed space usually depends on the type of activity of the company. The most optimal conditionally “open” office, which provides zoning of the space with glass or combined office partitions. Partition and cabinet systems are a tool for working with space, which combines technical solutions, innovative design, and the possibility of complex architectural solutions. Partitions allow optimal zoning of the room, based on functional tasks: to maintain high sound insulation, individuality of offices or the isolation of meeting rooms, and at the same time, maintain a sense of space, transparency, and openness. Office partitions are a tool for organizing space in accordance with the corporate cult and a very flexible, efficient and less expensive than the walls, the planning option. With their help you can create a spectacular design solution, transparency and visual contact, but maintain high sound insulation. Negotiation area The need for space for meetings and negotiations is dictated by both etiquette and confidentiality considerations. The meeting room in a modern style does not have to be completely isolated from the office, it can be separated from it by modular partitions or screens. Often one large isolated conference room is divided into several “individual” with the help of mobile elements. Modular and folding tables, light chairs or armchairs which are convenient for storage, are stacked to provide seats for a large number of visitors quickly or, on the contrary, to unload the interior as much as possible. Ideally, the company should have both types of meeting rooms—one for current negotiations at the middle management level and the other for negotiations at the highest level. A representative option can be a fairly spacious office for a senior executive. Modern managers value in their employees a creative approach to work, sociability, and ability to work in a team. A new look at office work requires a space that could stimulate staff activity (Visualization 1).

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Visualization 1 Negotiation area

Representative area The entrance and reception are intended for meetings and preliminary communication with visitors. In its design it is necessary to consider, first of all, needs and convenience of the clientele, without forgetting the styles of the company. Depending on the area of activity of the company, the number of customers who visit the reception area of its office is different than those at the entrance areas, respectively, and may require a different number of seats. For example, a wholesale company is unlikely to need sofas, but the host company needs to install a sufficient number of seats. However, an excess of sofas can “turn” the office into a furniture store. You will also need a wardrobe and tables in the entrance area. Its design should be combined with the overall interior of the office (Visualization 2). The reception room, traditionally located next to the manager’s workplace, can be equipped with elements from the series of his/her office [54]. Work area When forming a work area, the first consideration should be the convenience of office workers. Ordinary employees today can work in an open office or a mixedtype office. For the first version of the work area, characterized by open space of the office uses much more space, divided by furniture, stationary or mobile partitions into separate functional areas. The area here is significantly saved due to the lack of corridors and doors. When organizing a work area, a mixed option is popular.

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Visualization 2 Representative area

In such an office, places for regular employees are open, and for senior and middle managers there are separate offices. Extra walls in the office should not be erected if it is known that its structure will change. In this case, suitable zoning with furniture partitions, the so-called “Open Space” solution. Partitions are installed in different configurations and heights, depending on the functions they perform. For example, high partitions separate briefing areas or places for office workers who need privacy for a concentrated work activity. If employees in the workflow need communication, it is better to separate their seats with low special screens. When forming places, the work schedule should be considered. One place can be equipped for people who work part-time in order to use it on a schedule (Visualizations 3, 4). Office workers who periodically have to leave the workplace during the day, should be placed at the entrance [55]. Coworking area Coworking is a popular phenomenon in large cities, which means a single workspace (from the English “co-working” translates as cooperation, collaboration), comfortable and fully equipped with the necessary equipment, with essential Wi-Fi Internet access. Coworking is interesting because a person does not stay alone, but works among other people. People who are in this coworking zone can communicate with others, also find like-minded people and look for common solutions to problems. Coworking is a great environment for gaining useful business contacts and connections (Visualization 5). As a rule, coworking areas are converted into lofts—spaces

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Visualization 3 Cabinet

Visualization 4 Work area

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Visualization 5 Coworking area

that were previously industrial premises (factories, factories, former schools, etc.). Coworking has several modules, maximally equipped for isolation and comfortable quiet work. The audience may be different, and in the design it is better to focus in advance on a certain contingent of residents [56, 57]. Green area It is difficult to imagine the design of a modern office without the so-called green zone. Indispensable plants or a full-fledged garden have already become an integral attribute of any space set aside for business activity. Thanks to houseplants it is possible to arrange a cozy corner of nature in a place, at first glance, far for it. Landscaping of offices allows you to give the workspace new shapes, clean the air and significantly improve the mood. During the working day, it is important to be distracted for at least a few minutes. Looking at beautiful, green plants, you can recharge with positive energy, get rid of stress, get emotional nourishment and inspiration (Visualizations 6, 7, 8). Plants in the office contribute to a healthy microclimate, which affects the productivity of employees, protects their health from the negative effects of dust, germs and electrostatic fields around computers [58].

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Visualization 6 Green area

Visualization 7 Relax area

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Visualization 8 Kitchen

3.3 Implementation of Concepts Combining Stylistic and Compositional Features of Loft and High-Tech in the Design of IT Companies IT office design is a powerful image tool for the effective work of employees. Today, the interior design of an IT office is ordered not only by large companies, but also by middle-level representatives, as well as very small companies. Faceless premises are not able to attract customers, to impress partners, pointing to the potential of the company. Additionally, employees will not work actively, being in uncomfortable conditions, and interfering with each other’s work. An original and beautiful office helps to create the right working atmosphere, speaks of the level of the company, which positions it as a serious player in the market. Development of a design project for IT offices Modeling of ergonomic design is briefly reduced to the following stages: Development of a holistic office concept within a certain stylistic design. An important principle when decorating such a room, when buying furniture—to combine old and new. Brick wall or restored floor, can be combined with glass, plastic and metal, typical features of high-tech style. Unusual designer sofas and abstract paintings together with an antique lamp or a table will perfectly fit into this interior. As we

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have already understood, loft and high-tech are in harmony with each other. These styles are characterized by a special energy, dynamism, functionality and at the same time comfort and ergonomics, as well as, of course, gives the impression of modern and advanced style, which is important for the image of the IT company (Visualization 8). Development of security options This is the zoning of the premises, its division into conditional sectors for storage of valuables, work and leisure. There should also be an evacuation algorithm, heating, lighting, water supply projects in accordance with state and industry standards. Project details At this stage, each workplace is planned in terms of ergonomics and functionality in combination with the provided elements of the loft and hi-tech. Each office has a visualization and a real 3D model. Complete equipment of the object with modern technologies and equipment. Designing any office interior begins with choosing a planning option. This is an important component of the whole concept. Here it is important to take into account the architectural features of the existing premises and make it as suitable as possible for the premises of the IT company [59]. 1. 2.

3.

Open, the entire office space is one room without a clear division into separate rooms for the work area. Closed, the office is decorated in the form of offices. This version of the organization of space should be used for employees whose work involves concentration and isolation. Combined, which combines the features of the two species listed above. In such office there are closed offices and, at the same time, there are zones for collective actions, dialogue and rest.

Organization of space Today, several approaches to the organization of office space are popular: American, when the space is as open as possible, but the workplaces are separated by a large number of work partitions. The European office, also based on space, but in contrast to the American office, provides for the presence of premises: for structural units of the company, kitchen, living room, meeting room, etc. Japanese office, in which the workplace of each employee (area) is directly proportional to his position. Such an office is always functional. Given that Ukraine today is a fully developed competitive environment for a variety of businesses to attract attention, standing out visually, is a platform for the development of profitable cooperation [60].

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4 Conclusion 4.1 Synopsis The stylistic trends of loft and high-tech emerged almost in parallel in the last third of the twentieth century in the United States and France. The direction of the loft is used in the design of attics or abandoned buildings, and high-tech aims to introduce the characteristics of industrial design. In the modern direction of design there is a combination of loft and high-tech compositions in the development of abandoned public buildings. In the process of analysis of analogues of loft design and high-tech, their structural and compositional features are determined, which are combined on the basis of materials and structures. This is especially true for high-tech types, such as geometric high-tech, industrial high-tech, slick-tech and biotech. Acting as a complement or as an artistic composition in the functional areas of the loft. Ways to combine them are: 1. 2. 3. 4. 5.

Constructive expression of tectonics of the form of existing structures by means of hi-tech. Introduction of high-tech style functional equipment in the functional areas of loft spaces. The use of high-tech structures decor in the design of loft premises. The combination of color, texture, and shape of the material of geometric hi-tech in the design of loft premises. Positioning of the revealed special things characteristic of a loft and designs of a high-tech in existing objects.

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Is Pillar 3 a Good Tool for Stakeholders in CEE Commercial Banks? ˇ Petra Blažeková, Lubomír Benko, Anna Pilková, and Michal Munk

Abstract The Pillar 3 is a supervisory tool for enhancement of market discipline, which was introduced as a response to the financial crisis in 2008. The aim of this paper is an assessment of Pillar 3 disclosures as a tool for market discipline enhancement, which is supported by the analysis of the website data dedicated to Pillar 3 disclosures of the banking institution operating in CEE country. The analysis of the web portal is based on the time spent on the web page by the web users and analysing their interest in relation to time spent and content of the Pillar 3 disclosures. The data consist of pre-processed data from a log file of a web portal of banking institution. The web portal pages were joined into logical web parts that were joined into specific categories. The results show statistically significant differences in the average time spent on the web parts, the most average time was spent on the web part Annual Reports and Emitent Prospects. The Pillar 3 Q-terly Info web part had the second least average time spent. This part was analysed in more detail and its categories with the most time spent by the web users were identified. They are Individual Financial Statements, Shareholders and Risk Management, which can indicate different importance of these web categories for Stakeholders based on its content or its high volume.

P. Blažeková · A. Pilková (B) Department of Strategy and Entreprenuership, Comenius University, Bratislava, Slovakia e-mail: [email protected] P. Blažeková e-mail: [email protected] ˇ Benko · M. Munk L. Department of Computer Science, Constantine the Philosopher University in Nitra, Nitra, Slovakia e-mail: [email protected] M. Munk e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_15

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1 Introduction Financial crisis in 2008 has been an important lesson for all market participants and market discipline, too. Market discipline failure due to the inadequate public disclosure was followed by the inability of investors to judge the risk and withdrawal of lending in times of systemic stress [1]. However, the market discipline’s mechanism should avoid or remediate excessive risk taking by banks. When market discipline leads institutions to avoid excessive risk taking it is termed as an ex ante. From the perspective of regulators, ex ante market discipline is preferred [2]. Turbulences on the financial market has shown that integration of market discipline with regulatory discipline is crucial [3]. However, the process of integration of market discipline into regulatory framework reveals the problem of conflicts of interest between sustaining market discipline and safeguarding financial stability in the context of bank resolution. Whereas the former demands full enforcement of applicable legal rules when crises occur, the latter requires a more pragmatic and flexible approach. In order to achieve both objectives of these concepts, it is necessary to address this tension between them when designing a bank recovery and resolution framework [4]. Market discipline has been recognized as a key objective of the Basel II and III regulations. The higher capital requirements of the Basel III international banking regulations are used to monitor financial stability by market-solvency measures by central banks, because accounting measures did not readily indicate market risks [5]. Market discipline mechanism is operationalized through Pillar 3 information disclosure. The Pillar 3 disclosure requirements have been subject of the extensive regulatory review for the decade and the standards were revised few times aiming also to include comments of stakeholders. The last revision of the Pillar 3 standards has been published in 2016. Moreover, the Pillar 3 standards have been significantly changed and extended in all aspects, and also revised by EBA publishing Guidelines on disclosure requirements under Part Eight of Regulation (EU), which last revision was in 2017. These Guidelines are based on an update of the Pillar 3 requirements by the Basel Committee in January 2015 to enhance the consistency and comparability of institutions’ disclosures to ensure market discipline. The benefits of disclosure implementation are undeniable, which is also supported by empirical research. In many research studies the disclosures are broadly regarded as one of the most effective tool for market discipline enhancement [6]. Additionally, the quality of banks’ financial reporting is central to its efficacy and enhancement of the stability of the financial system in downturns [7]. Moreover, banks, which disclose better content of risk management information, provide to investors information to evaluate their financial assets, reduce uncertainty concerning their risk environment and enhance the ability to monitor management practices. As a result, this reflects in stock prices, improving total investment return, which reduces the volatility in stock returns [8]. Disclosures, in general, offers lower costs of capital and help investors to maintain information about the bank’s risk and its management. The lower risk disclosure generates ambiguity for potential stakeholders [9]

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and the market response to risk disclosure is small when the expected level of risk is high [10]. However, acording to Goldstein and Leitner, even the disclosures are necessary in order to prevent market breakdown, but there is also the potential threat of disclosing too much information, which destroys risk-sharing opportunities [11]. Moreover, increase in disclosures is not sufficient to prevent crisis and authors stress the necessity of disclosing of useful information to investors [1]. Additionally, to achieve both objectives of market discipline and financial stability, in terms of implementation of Pillar 3 disclosures by relevant authorities, this process should also address interests of stakeholders and assess objectively its relevant costbenefit information [4]. Stakeholders (shareholders, depositors, and loan customers) are an important source of market discipline, because of strong evidence that they discipline banks that restate financial statements. The soundness of market discipline varies by stakeholder as well as bank size and type [12]. Besides that, stakeholders need sufficient disclosure of risk related information to assess the risk profile of the banks [13] and disclosing information in a “clear and easily understandable way” [14]. It is important to include practical perception of stakeholders in the design of the useful model for disclosures, because regulatory reporting is mostly based on the theoretical point of view [15]. Based on that it is important to know, understand and critically evaluate stakeholders´ interests in disclosed information. In our research we assessed stakeholders’ interest in information disclosures applying relevant methodology that was based on previous research [16–20]. The aim of this chapter is to propose the design of Pillar 3 content related to stakeholders´ interests and specific conditions under results obtained by applying relevant methodology. The chapter is structured as follows: Sect. 2 is focused on overview of the research dealing with Pillar 3. Section 3 is devoted to the introduction of the used methodology and approaches used to obtain the results. Section 4 describes the obtained results and compares them on multiple layers. Subsequently, Sect. 5 provides a conclusion.

2 Related Work Pillar 3 disclosures represent implementation of effective market discipline from regulators’ point of view. Therefore, we have reviewed studies in which authors point out benefits connected to the implementation of Pillar 3 disclosures as an effective supervisory market discipline tool. Additionally, Pillar 3 decreases information asymmetry [21, 22], improve safety of the banking system [23], offers banks to raise cheaper capital [24] and quarterly reporting is useful to investors [22]. Chen and Du’s study [25] concludes that more informative disclosure improves the ex-ante risk sharing provided by financial intermediation, which means positive impact of bank disclosure on optimal risk sharing. According to Naz and Ayub [26], market discipline plays a vital part of risk taking behavior in commercial banks and evidence valid increase in disclosures with reduction of risk-taking. On the other hand, De Araujo and Leyshon’s [27] results suggest that, a majority of information disclosure

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requirements do not impact market discipline practices, only several of the disclosure requirements have a weak positive impact. Moreover, Pillar 3 benefits are shadowed by excessive superstructure and monitoring costs [28] and it can bring range of issues [29]. Substantially, important factors in assessment of efficiency of Pillar 3 disclosures as a market disciplining tool, is also its content relevancy in relation to interest of key parties. Studies which analyzed Pillar 3 disclosures from its content relevancy show that investors value the information in the financial risk disclosure and the most relevant categories of Pillar 3 disclosures are credit risk and liquidity risk [30]. Scannella [31] highlights the market risk category of Pillar 3 disclosures and concludes that only with full disclosure of a bank’s risk strategies and the effectiveness of its risk management policies is able to evaluate the bank’s potential risks. Bischof et al. [32] conclude that the improved content of Pillar 3 disclosures translates into higher market liquidity. These results indicate that the success of regulation depends on the institutional fit among regulators, regulated institutions and stakeholders. On the contrary, Faria-E-Castro et al. [33] points out the importance of disclosures content due to sensitivity of stakeholders to negative disclosures, which can also trigger inefficient bank runs. This is in conjunction with Del Gaudio et al. [34] whose analysis on a sample of European commercial banks (in the EU 15 area) over the time period from 2012 to 2017 finds that qualitative information disclosed in a negative tone contributes to explain the bank risk insolvency that lowers the distance to default. Furthermore, it is important to note, De Araujo and Leyshon’s study [27] reveals a window in content relevancy of disclosures in relation to banks’ risk profile because depositors and creditors are most responsive to information such as of the bank’s asset, off-balance sheet items, and ratings for other banking activities. Moreover, authors highlight also important factors, which influence Pillar 3 content efficiency. These factors are overall quality of the risk disclosures, and valuation of the quantitative information more than the qualitative information. Accordingly, we have reviewed studies, which analyse disclosures in CEE countries in which authors investigate the impact of the disclosures in CEE countries on the financial performance. Matuszak and Róza´nska’s study [35] revealed a positive relationship between banks’ disclosures and their profitability measured by ROA and ROE. Fijalkowska et al.’s research [36] highlights the slack resources that are strongly related to disclosures. Additionally, the studies below name factors important in assessment of disclosures in CEE countries. Firstly, Bartuloviˇc and Pervan [37] point out that disclosures in CEE countries have their weaknesses and Arsov and Bucevska [38] conclude that they lag transparency in comparison to their peers worldwide as measured one decade ago. Secondly, Habek’s results [39] confirm existence of a positive relationship between external verification of a report and the level of quality of the disclosed reports. The reports in V4 countries lack independent verification of the data in these reports. In addition, there is a lack of the studies assessing Pillar 3 information disclosures on the basis of its content relevancy in commercial banks in CEE countries. Research in this field is low and mostly in relation to Pillar 3 disclosures. Nevertheless, there

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are arising issues about the nature of parts, categories, information of Pillar 3 disclosures, which are important to stakeholders and what type of information is efficient from their point of view. The factors, which are crucial in order to implement effective supervisory market discipline are relation to timing, content of the disclosures, importance of specific categories. Concretely, few studies focus on the interest of the stakeholders to disclosures, which is positively correlated with sufficient information disclosures [19]. The results show that the most visited part of the disclosures was part Group and stakeholders’ interest in Pillar 3 information is only together with Annual reports or Information on group. This study is focused on the research gap in the area of the content relevancy of Pillar 3 disclosures to web users of the commercials banks in CEE. We used methodology based on the time spent on the web page by the web users. Time can be an important part of the analysis. The log file as the source of the user activity on the web portal contains a timestamp information. This could be transformed into a time variable that could offer various possibilities to analyze. Munk et al. [19] proposed a methodology of the evaluation of frequent itemsets of web parts over a dedicated time. The time variable was used to distinguish time periods. Drlik and Munk [20] introduced a novel approach to learning analytics. The authors offer an insight into a virtual course schedule as it shows the peak times for different types of course activities. Moh and Saxena [40] introduced a novel system that improved the web recommendations utilizing the time spent on the web page. The authors used the time in combination with the frequent itemsets. Masseglia et al. [41] changes the perspective how to deal with the log file based on time periods. The authors deal with the log file based on periods and not as whole. The main feature is extraction of various behaviors that would be otherwise hidden in the log file. Obtained results were analyzed and outcomes of this analysis present the stakeholders´ interests in the content of the disclosures.

3 Methodology The examined dataset consists of pre-processed standard web server log files. The dataset contains data and variables that deal with the Pillar 3 regulations. The web usage analysis was done based on a sample of 2 071 235 logged accesses that were obtained after data preparation. The research methodology (Fig. 1) was inspired by [16–19]: 1. 2.

Data acquisition: obtaining log files from multiple bank webservers. The data is stored using a load balancer so the log files have to be joined into a one file. Data cleaning of unnecessary files: removing of redundant data such as requests to images, styles, fonts, javascript, etc. These requests are not important for this analysis and need to be removed from the log file. The removal will be done based on the examination of the requested URL. As it contains any of the not needed filename extension.

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Fig. 1 Flowchart of the research methodology

3.

4.

5.

Data cleaning of robots: the log file is iterated and identified are the accesses of robots of search engines. These accesses are necessary to be removed for this part. The robots are there to browse through the whole web portal and create this way useless log entries [42]. User identification: to analyze the time spent on the web pages it is necessary to identify the users as the log file did not contain the information about the users login. The website was a site with an anonymous access. The standard user identification methods were used [42] where the log file fields IP address and the User Agent (contains the information of used web browser and computer operation system) were used to distinguish the users. Variable creation: the next phase contains the working with already cleaned log file. The time variables UnixTime and Length are created. UnixTime represents the standard Unix time in seconds starting on January 1, 1970 and is calculated

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6.

7.

8.

427

using the difference between the actual date and the January 1, 1970 in seconds. Length variable represents the time spent on a web page by the user and is calculated from UnixTime in seconds. Variables determination: a bank expert was asked to categorize every webpage according to the terminology used in the bank environment. The result of this process is the 9 different parts (grouped web pages) of the web represented by the WebPart variable (Rating, Group, Information for Banks, Annual Reports, General Shareholder Meeting, Financial Reports, Emitent Prospects, Pillar 3 Qterly Info, Pillar 3 Semiannualy Info) each attached to 3 different categories—the variable Category (Pillar 3 related (the first seven web parts), Pillar 3 disclosure requirements (quarterly/semiannually information) and Other). The Other category contains web parts like History, Awards, Anti Money Laundering, Ethical Codex, We support, Organizational Structure, Pricing List, Business Conditions, Contacts, Branches and ATM. Data exploration: based on the results of descriptive statistics were determined the hypotheses that claim that there is no statistically significant difference in the time spent on the web pages (Length) in the examined web content levels (Category/WebPart). Data analysis: hypothesis testing using one-way analysis of variance and multiple comparisons. In order not to reduce the power of statistical tests, the assumptions of univariate significance tests was verified. The homogeneity of variance was verified by a Levene’s non-parametric test with respect to the identification of deviations from normality. The analysis will be done on multiple layers. First will be analyzed all of the web content categories. As these categories were created from web parts, the next layer will be the analysis of web parts contained in the web content categories. As the interest is mainly in the Pillar 3 information then the next layer analysis will be focused only on the Pillar 3 web parts. The last layer will be the Pillar 3 Q-terly info categories created from the Pillar 3 Q-telry info web part based on the results of the research done by [19]. This division of the web parts and joining into categories can offer a detailed analysis of the interested Pillar 3 information.

4 Results The analysis of web user time spent on specific web part and category is dealt with in the following experiment. The hypothesis is that the web users spend more time on web parts and categories related to the Pillar 3 information (e.g. bank annual reports, minutes from general assembly meetings, the prospect of eminent, information about group and information for banks, financial information, information on risk management). Firstly, the attention was given to the web content categories to observe the interest of the web users. Based on the descriptive statistics can be seen (Table 1) that variability is almost similar for all the examined web content categories. Also, the standard error is close

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Table 1 Descriptive characteristics of time spent on the examined web content categories Level of factor N Total

Length mean

Length Std. Dev

Length Std. Err

Length −95%

Length +95%

3,502,282

63.71

53.30

0.03

63.66

63.77

3,203,668

64.51

53.33

0.03

64.46

64.57

Pillar 3 related

191,527

62.43

52.41

0.12

62.20

62.67

Pillar 3 disclosure requirements

107,087

42.02

49.07

0.15

41.73

42.32

Category

Other

Category Category

to zero. The variable Length is a dependent variable that represents time spent on the web page in seconds, and Category is an independent variable represents levels of the web content. From the point and interval estimates of the average (Table 1) can be seen the differences in the time spent on the pages of the examined web categories. The web users spent most of their time on sites in the Other and Pillar 3 related categories. On the contrary, less time spent the web users on the pages in the category Pillar 3 disclosure requirements. The results (Table 1) assume that time spent on the web page (Length) depends on the web content categories (Category). Based on these results, a null statistical hypothesis will be tested that claims that there is no statistically significant difference in the time spent on pages in the examined web categories. Based on the ANOVA univariate results (F = 9331.8, p < 0.001), the zero hypotheses rejected at the 0.1% significance level, i.e. a statistically significant difference in the time spent on the examined website categories was identified. Homogeneous groups in terms of time spent on the examined web content categories (Table 2) were not identified. While the time spent by stakeholders on the web pages from the Other category was above average, in the case of the Pillar 3 category the time spent on the pages was below average (Fig. 2). In addition, in the case of the Pillar 3 disclosure information was the time even significantly below the overall average of the time spent on the web pages. Table 2 Unequal N HSD for web categories

Category

Other

Other

Pillar 3 related

0.000022

Pillar 3 related 0.000022 Pillar 3 disclosure requirements

0.000022

Pillar 3 disclosure requirements 0.000022 0.000022

0.000022

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429

Fig. 2 Visualization of the average time spent on the web categories in comparison to the total time

The next part of the analysis is focused on specific Pillar 3 web parts. The web categories have shown that there are differences in the interest of web users. First is the focus on all of the categories dealing with Pillar 3 related web parts. The descriptive statistics (Table 3) show that the variability is almost similar for all the examined web parts. As well as the standard error is close to zero, however higher (>1) is only in the case of less frequent web parts Values and Financial Reports where the number of accesses was less than 2000. Differences in the time spent on the web parts can be seen from the point and interval intervals of the average (Table 3). The users spent most of their time on web parts Values and Branches and ATM. On the other hand, the least time was spent by the users on the web part Information of Banks. Based on these results, a null statistical hypothesis will be tested that claims that there is no statistically significant difference in the time spent on the web parts. The ANOVA univariate results (F = 11191.8, p < 0.001), the zero hypotheses is rejected at the 0.1% significance level, i.e. a statistically significant difference in the times spent on the examined web parts was identified. From a multiple comparison (Fig. 3), were identified ten homogeneous groups ( p > 0.05): (Rating, Organizational Structure, Business Conditions), (Business Conditions, Financial Reports, ID), (Financial Reports, ID, Awards), (ID, Awards, Pillar 3 Semiannualy Info, Ethical Codex of.), (Awards, Pillar 3 Semiannualy Info, Ethical Codex of., Contacts), (General Shareholder Meeting, Group), (Mision,Vision., Pricing List), (Emitent Prospects, History), (History, Annual Reports) and (Values, Branches and ATM).

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Table 3 Descriptive characteristics of the time spent on the examined web parts Level of factor

N

3,502,282

63.71

53.30

0.03

63.66

63.77

WebPart

History

40,585

71.73

49.99

0.25

71.25

72.22

WebPart

Awards

20,038

55.77

50.64

0.36

55.07

56.47

WebPart

Rating

22,785

51.35

50.63

0.34

50.69

52.00

WebPart

Mision, vision.

18,219

63.28

49.42

0.37

62.56

64.00

WebPart

Anti money laundering

12,209

46.58

48.12

0.44

45.73

47.43

WebPart

We support.

59,536

37.07

49.19

0.20

36.67

37.46

WebPart

Ethical codex of.

4887

56.86

49.96

0.71

55.46

58.26

WebPart

Values

788

89.65

42.72

1.52

86.66

92.64

WebPart

Organizational structure

48,627

51.89

50.56

0.23

51.44

52.34

WebPart

Group

69,580

61.15

52.51

0.20

60.76

61.54

WebPart

Information for 12,538 banks

30.79

41.15

0.37

30.07

31.51

WebPart

Business conditions

242,308

53.25

54.56

0.11

53.03

53.47

WebPart

Pricing list

568,218

63.59

53.49

0.07

63.45

63.73

WebPart

Claim order

4009

68.28

51.18

0.81

66.70

69.87

WebPart

ID

6452

55.15

49.08

0.61

53.95

56.35

WebPart

Contacts

1,536,016

57.69

53.56

0.04

57.61

57.78

WebPart

Branches and ATM

641,776

89.71

44.20

0.06

89.60

89.82

WebPart

Pillar 3 Q-terly Info

86,846

38.58

47.87

0.16

38.26

38.90

WebPart

Pillar 3 semiannualy info

20,241

56.79

51.36

0.36

56.08

57.50

WebPart

Annual reports

53,886

73.28

52.35

0.23

72.84

73.72

WebPart

General shareholder meeting

9298

60.25

51.08

0.53

59.21

61.29

WebPart

Financial reports

1748

54.05

54.39

1.30

51.50

56.60

WebPart

Emitent prospects

21,692

71.14

49.85

0.34

70.48

71.81

Total

Length mean

Length Std.Dev

Length Std.Err

Length −95.00%

Length + 95.00%

431

Fig. 3 Newman-Keuls test for the web parts

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Fig. 4 Visualization of the average time spent on the web parts in comparison to the total time

The time spent by the stakeholders (Fig. 4) was above average for the web parts: Claim Order, Emitent Prospects, History, Annual Reports, Values and Branches and ATM. The time spent was average for the web parts: Mision,Vision. and Pricing List. In the case of the remaining web parts, the time spent was below average. The users spent the least time on the We support. web part. This web part offers general information of the bank category, as well as does the Information for Banks web part related to Pillar 3, and the Pillar 3 Q-terly Info, which belongs to the mandatory disclosure category (60). The descriptive statistics (Table 4) show that the variability is almost similar for all the examined Pillar 3 web parts. Also, the standard error is close to zero, however higher (> 1) is only in the case of less frequent web part Financial Reports, where the number of accesses was less than 2000. A more detailed view on the results (Table 4) show that the users spent most of their time on Pillar 3 web parts Annual Reports and Emitent Prospects. On the other hand, the least time was spent by the users on the Pillar 3 web part Information of Banks. Based on these results, a null statistical hypothesis will be tested that claims that there is no statistically significant difference in the time spent on the Pillar 3 web parts.

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Table 4 Descriptive characteristics of the time spent on the examined Pillar 3 web parts Length Std.Dev

Length Std.Err

Length + 95.00%

N 298,614

55.11

52.16

0.10

54.93

55.30

WebPart

Rating

22,785

51.35

50.63

0.34

50.69

52.00

WebPart

Group

69,580

61.15

52.51

0.20

60.76

61.54

WebPart

Information for banks

12,538

30.79

41.15

0.37

30.07

31.51

WebPart

Pillar 3 Q-terly info

86,846

38.58

47.87

0.16

38.26

38.90

WebPart

Pillar 3 semiannualy info

20,241

56.79

51.36

0.36

56.08

57.50

WebPart

Annual reports

53,886

73.28

52.35

0.23

72.84

73.72

WebPart

General shareholder meeting

9298

60.25

51.08

0.53

59.21

61.29

WebPart

Financial reports

1748

54.05

54.39

1.30

51.50

56.60

WebPart

Emitent prospects

21,692

71.14

49.85

0.34

70.48

71.81

Total

Length mean

Length − 95.00%

Level of factor

Based on the ANOVA univariate results (F = 2851.6, p < 0.001), the zero hypotheses rejected at the 0.1% significance level, i.e. a statistically significant difference in the time spent on the examined website parts was identified. After rejecting the global zero hypotheses, the interest is in which pairs have a statistically significant difference. Three homogeneous groups (Table 5) were identified (Rating, Financial Reports), (Financial Reports, Pillar 3 Semiannualy Info) and (General Shareholder Meeting, Group), statistically significant differences were identified between the other pairs at the 1% significance level. The time spent by the stakeholders (Fig. 5) was above average in the case of Pillar 3 web parts: Pillar 3 Semiannualy Info, General Shareholder Meeting, Group, Emitent Prospects and Annual Reports and average in the case of Pillar 3 web part Financial Reports. In the case of the remaining Pillar 3 web parts was the time by the stakeholders spent below average. Based on the results of the previous research [19] it was decided to analyse the Pillar 3 Q-terly Info web part. The web part was divided into another seven categories (Table 6). The descriptive statistics (Table 6) show that the variability is almost similar for all the examined Pillar 3 Q-terly info categories. Also, the standard error is close to zero, however higher (> 2) is only in the case of the least frequent Pillar 3 Qterly info categories Consolidated Statements and Financial Indicators, where the number of accesses was less than 400. Also, higher (>1) is in the case of categories

0.00001

0.00001

0.00001

0.80984

0.00001

Pillar 3 Semiann. info

Annual reports

General Sharehol. meeting

Financial reports

Emitent prospects

0.00001

0.00101

0.95043

0.00001

0.00001

0.00001

0.00001

Pillar 3 Q-terly info

0.00001

Group

0.00001

0.00001

Rating

Inform. for 0.00001 banks

Group

Rating

WebPart

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

Inform. for banks

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

Pillar 3 Q-terly info

Table 5 Unequal N HSD for the Pillar 3 Q-terly categories

0.00001

0.79927

0.00013

0.00001

0.00001

0.00001

0.00001

0.00001

Pillar 3 semi. info

0.00036

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

0.00001

Annual reports

0.00001

0.00828

0.00001

0.00013

0.00001

0.00001

0.95043

0.00001

General Shar. meeting

0.00001

0.00828

0.00001

0.79927

0.00001

0.00001

0.00101

0.80984

Finan. reports

0.00001

0.00001

0.00036

0.00001

0.00001

0.00001

0.00001

0.00001

Emit. prosp.

434 P. Blažeková et al.

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Fig. 5 Visualization of the average time spent on the Pillar 3 web parts in comparison to the total time Table 6 Descriptive characteristics of the time spent on the examined Pillar 3 Q-terly info categories Level of factor N Total

Length mean

Length Std.Dev

Length Std.Err

Length − 95,00%

Length + 95,00%

86,846

38.58

47.87

0.16

38.26

38.90

Pillar 3

Other information

64,721

28.38

41.74

0.16

28.06

28.70

Pillar 3

Individual financial statements

8612

92.22

43.62

0.47

91.30

93.14

Pillar 3

Information on bank

9976

43.76

49.73

0.50

42.79

44.74

Pillar 3

Financial indicators

325

57.63

42.95

2.38

52.94

62.32

Pillar 3

Shareholders

1657

85.44

43.39

1.07

83.35

87.54

Pillar 3

Consolidated statements

394

55.67

47.39

2.39

50.98

60.36

Pillar 3

Risk management

1161

87.05

43.95

1.29

84.52

89.58

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P. Blažeková et al.

Risk management and Shareholders, where the number of accesses was less than 2000. The results (Table 6) show there are differences between the visit times of the examined Pillar 3 Q-terly info categories. The web users spent the most time on the categories Individual Financial Statements, Shareholders and Risk Management. Least time was spent on the categories Other information and Information on Bank. Based on these results, a null statistical hypothesis will be tested that claims that there is no statistically significant difference in the time spent on the examined Pillar 3 Q-terly info categories. Based on the ANOVA univariate results (F = 3458.1, p < 0.001), the zero hypotheses rejected at the 0.1% significance level, i.e. a statistically significant difference in the time spent on the examined Pillar 3 Q-terly info website categories was identified. After rejecting the global zero hypotheses, the interest is in which pairs have a statistically significant difference. Three homogeneous groups (Table 7) have been identified (Consolidated Statements, Financial Indicators), (Shareholders, Risk Management) and (Risk Management, Individual Financial Statements), statistically significant differences were identified between the remaining pairs at the 1% significance level. The time spent by the stakeholders (Fig. 6) was above average in the case of all Pillar 3 Q-terly info categories except the Other information category. In the case of the Other information category was the time spent by the stakeholders below average. Table 7 Unequal N HSD for the Pillar 3 Q-terly info categories Pillar 3

Other infor

Other information

Individ. financ. statem

Informat. Financ. on bank indicat

Shareh

Consol. statem

0.000026 0.000026 0.000026 0.000026 0.000026 0.000026

Individual financial statements

0.000026

Information on bank

0.000026 0.000026

Financial indicators

0.000026 0.000026 0.000792

Shareholders

0.000026 0.000026 0.000138 0.000026 0.058041

0.000026 0.000138 0.000026 0.000026

0.000792 0.000026 0.001974 0.000026 0.000026 0.997349 0.000026 0.000026 0.972818

Consolidated 0.000026 0.000026 0.001974 0.997349 0.000026 statements Risk management

Risk manag

0.000026 0.058041 0.000026 0.000026 0.972818 0.000026

0.000026

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Fig. 6 Visualization of the average time spent on the Pillar 3 Q-terly info categories in comparison to the total time

5 Conclusion This paper analyzed Pillar 3 disclosures in relation to market discipline by web portal analysis. The analysis was based on the time spent on the web portal of banking institution by the web users and analyzing their interest in relation to time spent and content of the Pillar 3 disclosures. The results of the analysis of time spent on a web portal of banking institution have shown that the most average time was spent on the web part Annual Reports and Emitent Prospects. Pillar 3 Q-terly web part was with the second least average time spent and was analyzed in more detail. Its categories Individual Financial Statements, Shareholders and Risk Management have been identified as the web pages with the most time spent by the web users. Information of a long time spent on the pages can indicate that there is important content for web users. On the other hand, it can also imply that there is too much content on the pages. These results are in conjunction with Giner et al. [30], higher value of financial risk disclosure than Pillar 3 disclosures) and De Araujo and Leyshon [27], higher value of other type of information than Pillar 3 disclosures. Moreover, these results are also in line with Munk et al. [19], whose results show that the most visited part of the disclosures was part Group and web users’ highest interest is in not in Pillar 3 disclosures as solo information, but together with Annual reports or Information on Group. Our findings could be used by regulators in the discussion process of designing new regulation, for institutions in the process of designing risk disclosure and web design. Moreover, information relevancy of the disclosures is

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important for key interested parties in the financial market analysis. Lastly, we have identified analysis of categories of Pillar 3 disclosures in more detail as a topic for future research. Acknowledgements This paper was created and its results supported by the Scientific Grant Agency of the Ministry of Education of the Slovak Republic (ME SR) and of Slovak Academy of Sciences (SAS) under the contracts No. VEGA-1/0776/18.

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Factors Behind the Long-Term Success in Innovation—In Focus Multinational IT Companies Martina Halás Vanˇcová and Iryna Ivanochko

Abstract This paper is focused on aspects of long-term innovativeness of multinational IT companies. Annually, there are several lists of the most innovative IT companies published, and many of IT companies are appearing in the first places for several years in a row. Our research is focused on those factors that enable these companies to maintain their innovativeness for several years. In order to identify the factors, we have compared investments into R&D of the four most innovative multinational IT companies and we conducted a survey about factors of corporate culture in IBM as one of the representatives of innovative multinational IT companies. Additionally, we reviewed business models of these companies in order to find out similarities and attitudes, which might have a positive influence on a long-term generation of innovations. The interview in the Innovation Centre of IBM allowed us to gain deeper insight into its processes. Thanks to our research we were able to identify specific factors of long-term innovativeness of multinational companies, which may be a source for further investigation as innovation management offers a wide range of perspectives since the field is continuously developing.

1 Introduction Innovation can be understood as a primary accelerator of economic growth within the society. Generally, innovation does not influence only technology or economics, but also ecology, nature, energy production as well as people personally. Innovation changes our attitude toward technology, consumption and also our life as a whole. Innovation brings change.

M. H. Vanˇcová (B) · I. Ivanochko (B) Department of Information Systems, Faculty of Management, Comenius University, Bratislava, Slovakia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_16

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1.1 Problem Area Innovation is able to help a company to grow. And with the growth, there is usually an increase in sales and profit. Therefore, companies use various strategies, they change business models, they try to hire the most valuable employees in the world—and that is done just for one purpose—to achieve the highest possible innovation and thus to achieve a higher growth, profits and in the end a shareholder value. Innovation is a very complex process and companies are trying to understand it, adjust it to market conditions and customers. When a company becomes an innovator, it does not mean that it will be able to innovate constantly. Innovation is always connected with the risk of failure. However, many companies are able to stay innovative for decades without any failure or decrease in profit. Annually, there are several lists of the most innovative companies published. Some of the companies included in the lists appear regularly, some of them are new and some of them suddenly disappear from the lists. Therefore, we are searching for patterns that lie behind the sustainability of innovation achieved by some of the multinational IT companies.

1.2 Research Questions In our research, we wanted to discover specific features that are typical for those companies, which are able to keep long-term innovation. Based on the description of the problem area we formulated the following research questions: Question 1: What is specific about the corporate culture of multinational IT companies that they are able to stay innovative for a long time? Question 2: Is there any relation between success in the area of innovation and money invested in research and development? Do innovative multinational IT companies invest similar amounts of money into research and development? To answer the research questions, we conducted research in the multinational IT company IBM as a representative. Our motivation is to find out specific facts that can be further used by managers responsible for setting up innovation processes and strategies in companies, researchers in the field of innovation, but also people interested in innovation and the field of IT in general. We focused explicitly on multinational IT companies because those are usually leading the annual list of the best innovators and thus it is interesting to find out what lies behind their innovative power and continuous innovativeness.

2 Research Methods Based on the research questions, we took two main approaches:

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• Find out what are the specifics of the corporate culture of an innovative multinational IT company • Analyse investments into research and development of innovative multinational IT companies, compare their absolute value and share of total revenue. The research approach was based on the assumption that the corporate culture has a substantial impact on innovations generated in a company. Therefore, we carried the research in IBM as one of the representatives of multinational IT companies to find the specifics typical for innovative companies. However, firstly, we needed to confirm that IBM can indeed be understood as one of the most innovative companies and also if it was a company that had been proving innovativeness for several years in a row. In order to confirm this, we analysed the number of patents registered by IBM in comparison to another multinational IT companies. In addition to this, we reviewed annual lists of the most innovative companies.

2.1 Analysis of the Number of Patents Annually, there is the list of registered patents issued by the Intellectual Property Owners Association (IPO). The number of patents is considered as one of the indicators of innovativeness of a company and therefore we compared quantities of patents registered in order to find out if there is any connection between this fact and position in the lists of the most innovative companies provided by consulting companies and publishers. The comparison enabled us to confirm if there was any connection between the innovativeness of a multinational IT company and the number of patents. Based on our results we formulated the list of four most innovative IT companies, which were used in further comparison in our research.

2.2 Analysis of Investments into Research and Development As a part of our research, we focused on the four chosen most innovative multinational IT companies and their R&D spending. We aimed at discovering whether there is any specific amount, which they annually invest in order to stay innovative and if the investments of these companies show any similarities. We compared the total amounts of investments into research and development of the chosen companies and in addition to this, we calculated individual R&D of Total Revenue Ratio in order to compare efficiency and effectiveness of R&D investments. The main purpose was to find out if R&D investments positively impacted the long-term innovativeness of a company.

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2.3 Analysis of Factors of Corporate Culture in a Chosen Multinational IT Company For the analysis of corporate culture, we conducted a survey in IBM as one of the representatives of multinational IT companies. We used questionnaires distributed among employees of IBM. In the questionnaire, we proposed statements about specific factors, which have an impact on the idea generation and innovations. We focused on areas such as the creativity of employees, supporting employees in idea generation, but also on factors such as risk tolerance for implementation of new ideas. Based on the results of our survey we concluded whether there are specific factors which have a positive influence on the long-term innovativeness of a company.

2.4 Review of Business Models We reviewed business models of the four chosen innovative multinational IT companies in order to find out if there were any aspects of business models influencing the innovativeness of these companies.

2.5 Interview in the IBM Innovation Centre As a part of the research output, we described processes carried out by the IBM Innovation Centre that we visited. Similarly, we explained the importance of innovation hubs in the company. Thanks to describing the Innovation Centre and innovation hubs of IBM we highlighted the difference between these two concepts in IBM and also what is the difference between them regarding contribution to the innovativeness of IBM.

3 Theory Behind Innovation Innovation in the sphere of information technology is a crucial factor that can strongly influence a company’s success. Innovation means to create, develop new things, make up new ideas, and change the past in order to make a difference. Fundamentally, the main aim of innovation is to add value to products and processes. If we look above the microeconomic picture, it is undeniable that innovation drives economic growth [1]. When people talk about innovation, it is often directly connected with IT as it is the area where the change has been appearing the most frequently in the recent years. In fact, information technology nowadays lies in every sector of the economy and thus it is natural, that innovation in other areas usually goes hand in hand with

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IT innovation. Actually, the output growth in the sphere of computers and office equipment grew annually in average by 16.1% within the decade of 1991–2001. We can look at innovation from two basic perspectives: from the perspective of people who accept innovation in their lives as a form of growing standard of living; and from the perspective of companies that need innovation in order to keep their position on the market, to achieve higher revenue and to reduce costs [2]. If we look at innovation from the economic perspective, it is clear that the future is bright for those companies that are innovative. Simply, resources are limited and only those companies that can use them efficiently will be successful in the future. Efficiency in the use of resources is indeed linked to innovative techniques and procedures [3]. Innovation lies in knowledge and its sharing. However, we incline to associate innovation with information technology because it is the area where innovation has been the most observable in the recent years. Today’s companies operate in the dynamic world where they have to focus on keeping and increasing their position in the market as the power of competitors is continuously increasing. Companies create strategies that are further developed into tactical and operational plans that help them to function effectively on a daily basis. However, their strategies are not focused only on actual short-term operations, problems, and needs. The strategies also highlight threats and opportunities for the future, and thus every company must think about its future value and the way how to bring innovation to their customers and the world.

3.1 Innovation Explained In recent years, there have been many definitions of what innovation is. Based on the publication by the Harvard Business School, innovation can be defined as a “combination of knowledge in original, relevant and valued new products, processes or services” [4]. Based on this statement, we can distinguish three main types of innovation: • Innovation of products • Innovation of services • Innovation of processes. However, there are many other areas where innovation can be applied and is necessary at the same time [5]: • • • • •

Business model innovation Marketing innovation Organizational innovation Supply chain innovation Financial innovation.

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When we talk about innovation, many people think only about products. However, it is not only about products and innovation within processes, especially when we talk about multinationals, is extremely important. However, whether we talk about the innovation of products, services or processes, it is crucial for a company to establish specific procedures on how to stimulate innovation. The innovation process has many stages that can be different for every company and they usually depend on the area where a company operates, on the size of a company and many other internal and external factors.

3.2 Innovation Process and Innovation Management However, either we are talking about an IT company or a food producer we can generalize the innovation process for all the types of companies, but in the end, the process will be naturally adjusted to the needs of a particular company. Figure 1 shows five typical stages of the innovation process in an IT company. First three stages represent research and development where a company focuses on research, discoveries, idea creation, brainstorming, creating prototypes or beta versions of chosen ideas and their initial testing. Furthermore, when the prototype or beta version is found attractive for the market, a company or an investor decides to commercialize the product and offer it on the market. The last step called Diffusion covers market penetration or adaptations to the current needs of the market and customers. Above the whole process, there are agents represented by external or internal initiatives or by market [6].

Fig. 1 General process of innovation in a company. Source [6]

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Innovation cycles can vary from one company to another, but it is necessary to establish specific rules for innovation management. Innovation management should include the following stages: • Ideas—to identify possible new ideas according to what the market wants; usually brainstorming and creative methods are used • Resources—assure enough quantity of people, finances, and facilities • Investigate—focus on possibilities how the idea can be transformed into a tangible product, or to service, improved business process or workflow • Patent—a company has to think about protection of its ideas • Design—create the first version of the innovative idea, it could be a model, or testing of a process, etc. • Develop—if the created design is acceptable, improve it and prepare it for the state acceptable by the market • Make—begin production of the innovation • Sell—advertise, find a communication channel, include marketing in order to sell products • Service—do not finish by selling the product, but communicate with customers, it is a source of potential further improvements, ideas, innovations [5, 7, 8]. In brief, innovation management is a crucial part of every company the main focus of which is to be innovative and to bring new ideas to the market. We have summarized basic information about innovation, its management, and the specifics of the innovation process. Naturally, there are also other approaches which could be discussed, but our main aim is to focus on innovation in multinational IT companies and to find specific patterns which can serve as a guide for keeping long-term innovativeness.

4 Number of Patents and Its Connection to Innovation The term innovation might sound like an intangible term and therefore it might be very challenging to measure innovation and even more difficult to compare two or more subjects from the innovation point of view. Many professionals or scientists might claim that innovation is impossible to measure. Naturally, measuring innovation could be compared to measuring art, which gives us insight on the difficulty in the selection of the measuring approach. From the macroeconomic point of view, innovation is the fundamental pillar that enables the economic growth, technological development and thus the increase in the standard of living. Thus, for example, Gross Domestic Product (GDP) as well as other macroeconomic indices, can be partially understood as a reflection of the innovation progress in a country. Additionally, innovation gives a country a competitive advantage, and this could have been seen even during The Industrial Revolution. For many decades, inventors, innovators, scientists, and companies have tried to protect their innovations in order to secure economic benefits. Therefore, they

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used various forms of Intellectual Rights Protection such as patents, trademarks, copyrights and several others. Basically, an increase in a number of patents in a country and similarly in a company is an indicator of progress in innovation. Given this, we can measure and furthermore compare the innovativeness of companies based on a number of patents registered [9, 10]. If we want to focus on companies’ longterm success factors in innovation, it is necessary to distinguish which companies are the most innovative. As mentioned above, a number of patents can be a remarkable measuring technique for comparing innovativeness of companies. The following table shows the list of companies with the highest number of patents registered 2014 (Table 1). The top 10 companies in the number of patents in 2014 are mainly operating in the sphere of information technology, electronics and telecommunications. However, since we are researching long-term innovation, it is necessary to review number of patents for these companies in the last ten years [11]. Table 2 shows the number of patents in individual years since 2005 and moreover, it contains figures for a change between two consecutive years. As stated in Table 2, IBM tends to keep the relatively stable trend in the increase of patents quantity. For many years, IBM holds a leading position in the number of patents. The gap between the number of patents of IBM and other companies on the list has been the most significant in the ten years we are presenting. In 2014, IBM reached almost 50% higher quantity of patents than no. 2 company—Samsung. There are several instances, where companies reached the lower number of patents than in previous years which can be a result of patent expiration since patents have limited duration, usually 20 years since filling the registration form [12]. However, it is necessary to highlight that the number of patents has been increasing for all the companies, and thus we can assume that it is necessary for companies to register their patents and to assure the security of future economic benefits. Table 1 Top 10 companies in quantity of patents in 2014 Company name

Number of patentsa

Industry

IBM

7481

IT

Samsung electronics

4936

Electronics

Canon

4172

Electronics

Sony

3214

Electronics

Microsoft

2983

IT

Google

2881

IT

Toshiba

2850

Electronics

Qualcomm

2706

Telecommunications

Panasonic

2394

Electronics

General electric

2293

Conglomerate

Source Intellectual Property Owners Association, 2014 a inception to date

18.52

28.62

6.56

N/A

32.53

116.85

44.17

9.93

2130

3121

N/A

2212

772

2536

1516

Source Own processing of IPO data

1379

1759

356

1669

N/A

2929

1656

2241

3592

4887

25.78

General Electric

2656

Panasonic

4518

2394

2293

Qualcomm

Quantity

2706

Toshiba

20.03

2850

Google

Change (%)

2881

Microsoft

5866

2983

Sony

Quantity

3214

Canon

2009

4172

Samsung electronics

2010

7481

4936

IBM

Quantity

Company name

2014

2013

3117

−4.30

10.94%

1243

309 1760

−0.06%

1575

58

2043

1461

2153

3502

4169

Quantity

15.21%

5.97%

N/A

43.37%

13.35%

4.09%

2.57%

17.22%

Change

2008

2086

2694

−11.14

9.92

2182

2679

24.01

6.38

2190

3316

31.55

3918

−3.08

4652

6788

Quantity

6.48

6.10

10.21

Change (%)

Table 2 Progress in the number of patents

N/A 1369

N/A −9.20%

284

1743

−9.64%

1662

1454

2047

2723

3125

N/A

8.80%

2040

2829

1471

2601

1151

2704

360

3307

Quantity

N/A

22.92%

0.48%

5.18%

28.61%

33.41%

Change

2.25

−4.77

48.33

3.00

90.27

15.27

−8.09

18.48

6457 5043

5.13

2007

2012

1906

−23.71%

−3.18%

1414

N/A

419

−32.22% N/A

1820

−4.23%

N/A

1473

2438 12.83%

2451 −16.04%

3621 11.10%

Quantity

20.21

5.21

39.43

17.25%

N/A

109.50%

36.02%

N/A

96.40%

54.46%

30.03%

49.36%

23.12%

Change

1697

2689

1055

2666

2368

2265

2922

426

−13.70%

N/A

6148 4868

−2.44

2006

2011 Quantity

170.19

14.19

59.29

13.18

3.59

5.03

Change (%)

Change

Quantity

−7.75

Change (%)

1206

N/A

200

1338

N/A

750

1234

1875

1641

2941

Quantity

2005

11.94

6.03

36.66

20.52

N/A

−24.13

6.34

10.02

7.75

4.81

Change (%)

Factors Behind the Long-Term Success in Innovation—In Focus … 449

450 Table 3 Average change in number of patents 2005–2014

M. H. Vanˇcová and I. Ivanochko Company name

Average yearly change in quantity (%)

IBM

11.70

Samsung electronics

14.12

Canon

9.99

Sony

14.18

Microsoft

20.35

Google

97.34

Toshiba Qualcomm

9.79 40.73

Panasonic

6.57

General electric

7.79

Source Own processing of IPO data

Table 3 shows an average increase in the number of patents in the period of 2005– 2014 for the ten chosen companies. A significant average change has been reached by the companies Google (97.34%), Qualcomm (40.73%) and Microsoft (20.35%). On the other hand, companies that are long-term leaders in the number of patents have a lower average change in quantity—IBM (11.70%) and Samsung (14.12%). The cause of significantly high average change in patents quantity for Google, Microsoft and Qualcomm is the area in which they operate. All three companies are focused on information technology and telecommunications, and it is the sector that has been changing the most rapidly and significantly in the last decade. On the other hand, the product portfolio of IBM and Samsung is more diverse and thus their quantity of patents did not change so rapidly due to recent changes in the information technology and telecommunications since their patents are not only from the IT field. The three multinational IT companies—IBM, Microsoft and Google show an increase in the number of patents in total. However, there are no similarities or interdependences in the annual percentage growth of patents and thus we cannot say that the rhythm of the increase among them. Regarding the total number of patents, we can say that Google, as a multinational IT company, accelerated its innovation process the most in the last years, in comparison to Microsoft or IBM. Microsoft and IBM have a more stable increase in the number of patents and based on the trend line in the last three years we can expect, that Google will be registering patents in higher amounts, while we can assume IBM and Microsoft to keep stable growth in the patents quantity. In 2009 and 2010 there was the most significant impact of economic crisis on the productivity and earnings of companies. Companies usually tend to cut costs and investments into development during the crisis. This tendency, however, was not reflected in the number of patents registered. IBM managed to keep its stable path and Microsoft even registered by 44.37% of patents more in 2009 than in 2008. Naturally, the impact of the crisis is not short-term, and it might be the result of slowing down and decrease in the number of patents for IBM and Microsoft respectively in 2011.

Factors Behind the Long-Term Success in Innovation—In Focus … Table 4 Age of companies leading in the number of patents

451

Company name

Year of establishment Age of the company

IBM

1911

104

Samsung electronics

1938

77

Canon

1940

75

Sony

1946

69

Microsoft

1975

40

Google

1998

17

Toshiba

1875

140

Qualcomm

1985

30

Panasonic

1918

97

General electric

1892

123

Source Own processing of data available on the Internet

Additionally, it is necessary to compare the length of a company’s existence. It is natural that companies with a long tradition have a higher number of patents than younger companies. Table 4 shows the year of establishment for top 10 patent companies. If we compare three oldest companies—Toshiba (140 years), General Electrics (123 years) and IBM (104 years) we can see that IBM reached the highest average change in the number of patents. However, it is necessary to compare IBM with companies operating in the same or similar sectors—thus mainly with Microsoft. Microsoft is currently 40 years old company and they hold 2983 patents, while IBM held 2941 patents in the year 2005—it was in its age of 94 years. Thus, we can say, that some factors of the modern age are accelerating the origin of new patents. One of these factors can be sharper competition in the IT market than several years ago which can also be supported by the extreme increase in a number of patents registered by Google—a rise to 2881 in the last five years. Therefore, we cannot say that the age of a company is the only factor that contributes to the number of patents, there are many other factors such as market competition, a specific area of interest within the IT sector and many others which should be further researched.

4.1 Selection of Representative IT Companies for Our Research For the purposes of our research we will focus on four multinational IT companies that fulfil the following criteria: • They have to be multinational companies • They have to be at least ten years old since we are focused on the long-term innovativeness

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• They have to operate in the IT field. Our selection of the candidates for the further analysis about long-term innovation in IT is, apart from the number of registered patents, supported by several lists of the most innovative companies in the world. We focused on the following published lists: • • • •

The Most Innovative Companies by Business Consulting Group [13] The 50 Most Innovative Companies of 2014 by Business Insider [14] The Top Innovators and Spenders by PwC [15] The World’s Most Innovative Companies 2014 by Fast Company [16].

The publishers used a different methodology for the creation of the lists. All of the methodologies are valid and therefore it might be difficult for the audience to distinguish which IT company should be understood as the most innovative in 2014. Naturally, the publishers included companies from all industries. Based on them we deduced our rating. In our list, we focused only on the four chosen multinational IT companies and we additionally compared their rating in the Innovation list with the number of patents they registered (inception to date) (Fig. 2 and Table 5). Based on the lists of the most innovative companies we chose four multinational companies which are considered to be the most innovative regarding the position in the list, but also the number of patents: Apple, Google, Microsoft and IBM. It is necessary to add that Apple did not appear in the previous tables summarizing quantity of patents, because the number of patents registered by this company does not belong to the top 10. As we can see in our comparison, Apple, Google, Microsoft as well as IBM are generally considered by the publishers as the most innovative companies. Apple reached the first place in three lists and 14th place in the fourth one. Google reached second place in three lists and first place in one list. Microsoft and IBM were not

Fig. 2 Progress in the number of patents 2005–2014. Source Own processing of IPO data

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Table 5 Order of the multinational IT companies by innovativeness Company name

BCG

Business insider

PwC

Fast company

Result

Quantity of patents

Average increase of number of patents in the last 5 years (%)

Apple Google

1

1

1

14

1

2003

46

2

2

2

1

2

2881

97

Microsoft

4

5

9

N/A

3

2983

0

IBM

13

4

8

N/A

4

7481

6

Source Own processing of data

mentioned in the list published the Fast Company. They were included in three lists, Microsoft reached, on average, 6th place and IBM 8th place. Furthermore, we can see the connection between the average increase in the number of patents in the last five years. Apple and Google had an extremely high increase in the number of patents and they were also considered as the most innovative companies by most of the publishers. On the other hand, Microsoft and IBM had a very low increase in patents; they did not reach high positions in the lists and they were even not mentioned in one of the lists. In conclusion, we found out that the most innovative multinational IT companies tend to register the highest number of patents in the world. In addition to this, we confirmed that the increasing potential of innovativeness is positively related to the increasing number of patents and therefore the innovativeness of a company could be predicted by the number of patents increasing consequently for several years. Thus, there is a positive correlation between being published and recognized as the most innovative company and having registered a high quantity of patents.

5 Analysis of Investments into Research and Its Influence on Innovation Research and development are an irreplaceable part of innovation management. Simonen and McCann presented the study from Finland, where they found out that company’s R&D has a positive influence on the product as well as process innovation [17]. Their findings motivated us to compare investments into research and development of the most innovative multinational IT companies, which we mentioned in the previous section—Apple, Google, Microsoft and IBM.

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5.1 The Absolute Value of Investments in Research and Development For the purposes of the analysis, we compared Income Statements of the four selected companies and we were focused on the item Operating Expenses—Research and Development. The comparison of the absolute value of investments into R&D as presented in Table 6 shows that Apple and Google, who are currently the no. 1 and no. 2 innovating companies, have increased their investments into R&D on average by 36% and 27% respectively in the last five years. On the other hand, Microsoft and IBM have been keeping average increase of R&D investments rather low and even IBM had a decrease in the investments by 1% from 2012 to 2013 and by 13% from 2013 to 2014. In average IBM had the average decrease in the R&D investments by 2% between the years 2010 to 2014. As we can see, in the last five years, IBM did not increase the amount invested in R&D and it keeps the stable level around 6 billion dollars annually. Similarly, Microsoft has kept the amount of R&D investments rather stable and their average increase in the last five years was by 7%. In conclusion, we can distinguish two perspectives: Apple and Google who rapidly increased investments into R&D in the last five years and, on the other hand, IBM and Microsoft who are keeping their traditional pace. Additionally, we also analysed the relationship between R&D investments and the number of patents registered in the last five years by the four multinational IT companies. We can see the connection between the increase in R&D investments and the number of patents for all of the companies in our focus. As showed in Table 7, Apple and Google reflected their investments into an increase in the number of patents. Google increased the number of patents almost seven times since 2011. On the other hand, IBM and Microsoft did not rapidly increase the number of patents as well as they did not increase investments into R&D.

5.2 R&D of Total Revenue Ratio In a company investing money into research and development, managers must make sure that money will be used effectively and that it will, in the end, bring another profit. R&D of Total Revenue Ratio can provide us insight into how effective a company’s investments into R&D are. It is undeniable that R&D assures a company’s long-term success because it enables development of new products as well as the design of new services. During the times of financial crisis, it is natural that companies tend to cut costs and it is often reflected in fewer investments allocated for R&D. The R&D of Total Revenue Ratio shows, how much companies invest back to R&D from sales they generated. It means, how much companies invest back to further development of new products, services, improvement of processes, generation of new ideas, etc. The following table shows the ratio for the four companies of our interest.

1.78

3.76

8.71

6.03

Apple

Google

Microsoft

IBM

4

4

37

36

Change (%)

6.26

9.04

5.16

2.43

2011

1

8

32

39

Change (%)

6.30

9.81

6.79

3.38

2012

10.41 6.23

−1

7.95

4.48

2013

6

17

32

Change (%)

Source Own processing of comparison Income Statements item Research and Development [35–38]

2010

Company

Investments into R&D in billion $

Table 6 Investments into R&D of top four most innovative multinational IT companies

−13

9

24

35

Change (%)

5.44

11.38

9.83

6.04

2014

−2

7

27

36

Average increase (%)

Factors Behind the Long-Term Success in Innovation—In Focus … 455

N/A

Source Own processing of IPO data

4

5%

IBM

5866

37

4

N/A

−24%

Microsoft 3121

426 6148

2368 5

14

170

68

Google

676

36

N/A

Apple

N/A

2011

Change in Number Change investments of in the into R&D patents number (%) of patents (%)

2010

Company Number Change name of in the patents number of patents

Year

1

8

32

39

6457

2704

1151

1136

5

15

90

56

Change in Number Change investments of in the into R&D patents number (%) of patents (%)

2012

3117 6788

−1

2190

1775

6

17

32

10

−4

32

13

Change in Number Change investments of in the into R&D patents number (%) of patents (%)

2013

Table 7 Number of patents compared to the investments in R&D of the four most innovative multinational IT companies 2014

−13%

9

24

35

7481

2983

2881

2003

Change in Number investments of into R&D patents (%)

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457

Table 8 R&D of total revenue ratio Company

R&D of total revenue ratio 2010

2011

2012

2013

2014

Average ratio

Apple (%)

2.73

2.24

2.16

2.62

3.30

2.61

Google (%)

12.83

13.62

13.54

13.29

14.90

13.64

Microsoft (%)

13.95

12.93

13.31

13.37

13.11

13.33

6.03

5.85

6.03

6.24

5.86

6.00

IBM (%)

Source Own processing of comparison Income Statements item Research and Development [35–38]

Table 8 shows that Apple has the lowest ratio in spite of it is currently no. 1 innovator in the world. Thus, even by the first insight, we cannot confirm that there is the relation between investments of a specific amount of total revenue into research and development. We also did not find that the four companies would have the same percentage of R&D investments and we found connection only in two facts: • Google and Microsoft have shown very similar R&D of Total Revenue Ratios, 13.64% and 13.33% respectively, however, Google has slightly increased the ratio in the last five years while Microsoft decreased the ratio. • All the companies have been keeping the ratio mostly stable and constant during the last five years, which means that they managed to be innovative without any substantial increase in the ratio. The similar findings result from the article by Schmidt, who says that R&D expenditures are irrelevant to the disruptive growth of a company and in the article, he concludes that a company cannot buy innovation. He supports the statement by the fact that start-ups do not spend such large amounts of money in R&D, but still, they can be incredibly innovative [18]. If we look at the long-term point of view, in spite of the total amounts of R&D investments have increased in Google and Apple, their ratio of R&D of Total Revenue was stable. IBM even decreased the absolute amount of investments as well as the ratio and still appears on the lists of the most innovative companies and it is still able to contribute to the IT world with innovations such as Watson, and even more, it is able to keep the innovativeness for several years. Based on our findings we can conclude that we have not found the relation between investments into R&D and long-term innovativeness of four chosen multinational IT companies.

6 Business Model and Strategy of Innovative Companies It does not take one day to achieve the status of an innovative company. In order to be innovative, companies have to invest lots of money and time into research and development, improvement of internal processes, but also to the hiring of the right people (so-called quality human capital). In the following section, we will discuss

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decisions that IBM made on its way to becoming one of the most innovative and successful companies in the area of information technology. We will compare them with other innovative companies in the IT field. In conclusion, we will provide a summary of the processes that we consider as “innovation stimulating”.

6.1 Use Case: IBM During its history, IBM made several breakthroughs in the area of IT—world’s first transistor memory in 1960s, making computers twice as fast thanks to the memory freed up in 1970s, Watson, nanotube technology and many others. It is necessary to highlight that IBM has had five employees yet who won the Nobel Prize. However, the company operates in the IT market for so many years that its innovativeness had to be supported not only by good innovation strategy and strong support of research but also by a prosperous business model that helps the company to maintain the long-term innovation progress. The company was very large in the 1960s as well as the 1970s, but on the other hand, despite its size, it was very well managed, and it was reaching profit. However, in 1993 the company announced a huge loss, and it was clear that there is the need for a new approach, new business model. And this is the point that needs to be highlighted—there is not one specific model, one specific approach in innovation and success that can be held for hundreds of years and keep a company on an innovation track. A company has to be flexible and it has to react to dynamic changes in the environment, it needs to respond to challenges of competitors, and steep progress in technology. Thus, also IBM changed its approach. In spite of gaining billions of profits from licensing of IP and from patents, they discovered that they could offer services for their IT business partners and therefore a new division of IBM was created—IBM Global Services. This can be understood as an innovative approach to change in the processes and business model. We can take this as a solid example of innovation in the sphere of business orientation and business model, which can serve other companies as an inspiration [19]. Another example of a disruptive change in IBM business was the sale of its PC group to Lenovo. In the past, IBM was a well-known retailer of Think Pads. The decision to sell was clear—the division was not so profitable, and IBM was not willing to invest time and money into its further development and the strategy of the company started to focus more on software and business services [20]. Innovation is not only about a product. Companies must always consider their business model. Apple also disruptively changed its business model and it was the step that helped the company to progress and grow in the recent years. Specifically, by introducing the iPod, Apple brought something new to the market, another way of selling a technology gadget to customers. This step was not only about the iPad as a product, but it was also about the feeling of being connected with the product, the status it gave to customers. Apple introduced an entirely new approach to the music industry—iPod in combination with iTunes made a revolution when people

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could buy songs for one price independently from whole albums. Since then Apple started to bring an added value to customers and thus it opened a new door in the area of innovation. In addition to this, Blackberry made another breakthrough in the telecommunications field. However, the company was not able to change itself and react to recent breakthroughs, and thus, due to inability to change its business model, the company has been losing its power, potential and profit [21, 22].

6.2 Approach to the Business Model of the Four Selected IT Companies In the previous section, we mentioned the most innovative IT companies. In the following section, we analysed the business models of these companies in order to find out its importance for innovativeness. The source of analysis is a longterm observation of companies and their history as well as managerial and strategic decisions. Apple made a disruptive change in its business model by the introduction of iPod and iTunes. That time Apple did not bring only a piece of hardware, but it introduced a new service, new activity for customers. Moreover, Apple significantly changed its focus on business from personal computers to gadgets that started to appear in the market and the company was able to react to the market flexibly. Basically, Apple became a company known for connecting technology, design and services with direct customers. Since then, revenues of the company started to increase rapidly. In this case, we could see the disruptive change in the business model [22]. However, the disruptive change of the business model had already occurred, and in the recent years, we can only see the expansion of variants of already existing gadgets. From the services point of view, Apple still keeps on bringing new innovative approaches (such as Apple Music) and the company definitely stays attractive for customers. Google made the breakthrough with its Gmail, Google Docs, but also by the fact that it provides one of the best Internet browsers—Chrome—and all of these products are free of charge for customers. In the past, users would pay to email providers such as AOL just to be able to have a personal email box. Additionally, Google changed its business model toward cloud business, which is recently an important factor influencing business models of many IT giants. Google has a very untypical style of management, but mostly a very strong innovative company culture. They invest in research of disruptive technologies such as Google Glass or a self-driving Google Car. Similarly to Apple, Google carried out a disruptive change in their business model and the company continues to make disruptive changes. For many years, Microsoft has held a stable place among global leaders in personal computing. For several years, Microsoft strongly kept its pedestal, and no company would be able to “out-innovate” their operating system. Naturally, Microsoft is still the leader in the area of office applications and Windows leads in the market share regarding operating systems. Microsoft presented its new version of operating system

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Windows 10, which has significantly changed a view on their attitude to business. After several years of paying for operating systems, a significant change of its business model was the introduction of no annual fee for the new operating system, which is considered as a very similar approach to the above-mentioned business model of Google. The introduction of the Windows Phone was another good step in the diversification of its portfolio; however, it did not change the market disruptively. IBM is mostly focused on business to business customers. Thus, its business model cannot be so easily compared to the three companies mentioned above. However, as we highlighted earlier, IBM made a disruptive change in 2005 when it decided to sell the PC group to Lenovo. IBM then started to orientate on services and software. In the past, their computers were well-known and used worldwide. But IBM was not afraid to lose this asset because they knew that the market required something else. In addition to this, IBM can be continuously seen as a very innovative company. They invest money in research of such IT areas that are barely in focus of other IT competitors. IBM Watson is just an example of development and research of a cognitive super-system—and this can definitely be understood as a disruptive innovation. Additionally, IBM is obviously able to quickly react to changes in the IT market since they concluded the partnership with Apple, which is by many specialists understood as “unprecedented” or “odd”.

6.3 Deduction Based on the Analysis of the Business Models Based on our analysis of the business models of four currently most innovative companies, we found out one similar feature—they all focus on their day-to-day business, but they also invest time and money into research of new areas, disruptive technologies and innovations. This is the orientation that can help the innovative companies to keep their innovative tempo. The diversification of a business portfolio by new ideas is beneficial for companies. After the analysis of the business models of four companies, we found out that they were not afraid to rapidly change the business focus and it enabled them to stay or become recognized as an innovative company. Innovation cannot be focused only on products and services, it has to go through all the aspects of business, even such a basic thing as a business model of a company. If a company operates for decades in the market, a change of a business model is purely necessary.

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6.4 Connection Between Innovation Management Model and Innovativeness Additionally, we looked at innovation management models by Jean-Philippe Deschamps, who has described nine basic innovation governance models. He emphasizes that companies, especially the multinational ones, tend to apply more of the models at once, as they have the business distributed all over the world and many of them tend to adjust innovation governance based on local practices in a particular country. Based on the proposed models we can see where a company puts the overall responsibility for its innovation. Deschamps distinguishes responsibility on three levels of management: top management level, senior management level and middle management level. Furthermore, he emphasizes personal responsibility for a company’s innovation since it can be in the hands of a single individual (e.g. CEO, CTO, a single Innovation Manager), a duo (e.g. CTO and Business Unit Manager at once), a small group (e.g. subset of top management) and a large group (group of company’s champions in the innovation area). We will further briefly describe each model in order based on the occurrence in the world’s companies [23]. It is clearly visible that IBM is applying a so-called Top Management model. This model is the most usual type of innovation governance. In this case, the top management – represented by one individual or a top management team takes responsibility for the innovation governance of the whole company. The most significant advantage of applying this model lies in the high position of top management which is connected with a higher emphasis on their responsibilities. On the other hand, since the top management is responsible for many other areas within a company, they might not get enough highlight to the topic of innovation. Furthermore, Apple, Microsoft and Google applied the model called The CEO or President. In this model, there is usually one main representative of the company, usually a well-known person who is presenting the strategy and innovations to the public. In Apple, it was Steve Jobs and later Jim Cook who officially represented the company’s approach to innovation management. In Google, Larry Page, a well-known representative, is responsible for translating the company’s attitudes, strategy or vision. Very often, the slim line between the model 1 and model 2 can be rubbed out and companies may not apply one particular model forever. This type is very often applied in very innovative companies established by “charismatic” visionaries, but also in small companies, where the president takes the role of the innovation representative by default [5]. To sum it up, the four chosen companies show certain similarities in attitudes to the business models as well as the innovation strategy. Our findings summarize that the companies were willing to take the risk of changing the business models in order to accelerate innovation or to be able to keep innovativeness. They were not afraid to try a new approach to business and clients or to leave areas in which they were already successful. It means that long-term innovative companies have one thing in common: the ability to take the risk of disruptive change. Regarding communication of their strategy and the whole marketing and PR of being an innovative company, the four companies mostly prefer to present their innovations by one representative who

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is, usually, recognized as inspiration in innovating and thus the companies are able to keep their recognition as an innovative company. Innovative companies are willing to take the risk of presenting only one individual as a representative of innovations.

7 Analysis of the Internal Environment of an Innovative Multinational IT Company 7.1 Corporate Culture Many scientists are trying to find out what are the similar aspects of successful innovative companies. They conclude that some patterns are similar for those companies that are able to stay innovative for a long period of time. To be a successful innovator does not only mean to have a strategy oriented toward innovation, but it is also necessary to combine the right people and processes. In addition to this, an innovative company usually has a specific corporate culture that supports or accelerate the innovation processes and generation of new ideas. Corporate culture represents specific collective thinking, transfer of ideas, beliefs, opinions, but also aspects such as common language, a way of interacting with employees as well as communication flows. Based on the article published by Harvard Business Review, innovative corporate culture should have the following common aspects [24]: • Innovation must be a part of a company’s strategy • Employees should be allowed to self-select their areas of interest and let to spend 15% of their time working on these areas • Innovation and creativity must be felt everywhere in a company • Innovation must be supported by communication • Innovators must be assured that they should not be afraid of failure • Encourage customer-driven innovation. For example, Google would give its employees up to 20% of the time to focus on projects they are interested in just to accelerate their idea generation and creative thinking. Moreover, their corporate culture is not afraid of failure, and they take it as a natural part of the innovative process. Failure is understood as a phenomenon, which employees should not be scared of [25].

7.2 Survey at IBM Corporate culture can be so strong that it can positively influence innovation. Since IBM is considered one of the most innovative IT companies in the world, we decided to find out more about its innovative corporate culture. The strategy of IBM has been strongly focused on innovation for several years. Attention to innovation is

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also transferred to employees through values, while one of them is “Innovation that matters”. If a company already highlights innovation in their values, which are usually very well known among employees, it is easier to support innovative corporate culture. We conducted an anonymous survey among employees of IBM. The survey was carried out in the form of the questionnaire. In the questionnaire survey, we asked 37 respondents who work at IBM to answer 11 questions about their corporate culture. The research sample consisted of 28 men (76%) and 9 women (24%). The questions were in the form of statements and employees were asked to rate them on the scale with the following options: Strongly agree, Agree, Neither agree nor disagree, Disagree, Strongly Disagree. Most of the respondents (30) work in the IBM branch in Slovakia (81%), 1 respondent (3%) is located in the Czech Republic, 2 in Austria (5%), 2 in Russia (5%) and 2 in Poland (5%). The research sample from the age perspective is shown in Fig. 3. In the first question, we proposed the following statement: I consider my company as innovative. The purpose of this question was to find out if employees feel the innovativeness of their company and if innovation is present in their day-to-day business. 57% of respondents agreed with the statement and 22% strongly agreed. This is a positive finding, confirming that employees realize that they work for an innovative company and that they are a part of the innovation processes. The result is also confirming the engagement of employees in innovation – they confirm that their company is innovative and therefore they are aware of the importance of innovation for the success of the company. Moreover, the fact that the company is innovative can further motivate employees to be creative, to bring new ideas and innovations since they know that it is something that is strongly valued in the company. In the case of IBM, innovation is even the part of the company’s values: “Innovation that matters”

Fig. 3 Age of respondents

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Fig. 4 I consider my company as innovative

[26]. The company presents itself as “thinking forward”, the company takes the role of an innovator, challenger, improver as well as a champion in new ideas. Our survey confirmed that employees are consistent with this value (Fig. 4). In the second question, we formulated the following statement: My company supports innovations and new ideas. By the statement, we wanted to find out if the company is internally open to new ideas and, especially, if employees feel this openness and incline to innovation. 32% of respondents agreed with the statement, 14% strongly agreed, but 24% disagreed and 16% strongly disagreed. The results can be influenced by specific work area where employees carry out their daily tasks, however, the result is not clearly stating that the company would strongly support innovations. In comparison to this, one of the main principles that Google stated to be the most important for innovation is the fact that innovation must be present everywhere in the company [25]. In our research we did not fully confirmed this statement and we can claim that in this case the result is rather ambiguous. As we mentioned above, the company specifically stated the word innovation in its values, however, based on our results we cannot say that it would be perfectly transformed into company’s culture and to the minds of employees. The result of the question is presented in Fig. 5. The third statement that we included in the survey was related to the willingness of taking the risk for new ideas, explicitly: My company is willing to take the risk for new ideas. As we mentioned above, a company successful in the field of innovation should not be afraid to accept the risk and definitely failure should not be negative in the eyes of employees. However, the result of our survey shows that employees feel that their company is not fully willing to accept the risk. Only 5% of employees strongly agreed with the statement and 14% agreed, which makes only 19% of employees, but on the other hand, 46% of employees disagreed and 30% even strongly disagreed with

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Fig. 5 My company supports innovations and new ideas

the statement. It suggests that employees do not consider their company as willing to bear the risk of new ideas, innovations and experiments of employees. However, it is necessary to highlight that our research sample is not so large to be able to tell the result with the full certainty. Our findings may be influenced by the specific department where respondents work, their area of work interest, responsibility at work, but also by things such as local management, the age of the first line manager, the attitude to risk. Naturally, it might be possible that if the first line manager is not personally willing to take the risk, the manager might influence employees and company’s culture. Dyer and Gregersen, who are the authors of the publication The Innovator´s DNA, claim that the willingness to undergo risk is an important factor that makes the company’s reputation as a successful innovator [27]. However, when we talk about multinational companies, the willingness to take the risk might be influenced by the country where the company operates. People from different nationalities take different approaches to risk. Naturally, risk tolerance is influenced by culture, family patterns as well as the country’s history or religion. In spite of IBM is managed by HQ in the USA, it is undeniable that individual national factors influence management, and the risk tolerance is not an exception. Additionally, one of the IBM values says: “Dare to create original ideas, which highlights the need for the creation of new ideas by employees”. According to this value, IBM asks employees to: • Stay curious—always ask, stay fascinated, make discoveries • Innovate everywhere—bring innovation to every sphere of everyday life • Courageously champion a new idea—do not be afraid of novelty. As we can see, based on our findings, employees do not feel the third part of the value breakdown—champion a new idea, but as we mentioned above, our results

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Fig. 6 Make company is willing to take risk for new ideas

might be affected by a specific country. In the following figure, we are presenting the result of the question no. 3 (Fig. 6). The fourth statement that we included in the questionnaire was: My company challenges employees to bring new ideas. In this case, we discovered positive findings, and more than a half of respondents agree with the statement. Specifically, 32% of respondents strongly agree and 46% of respondents agree with the statement. The finding is positive because challenging employees to create new ideas boosts innovation and the whole corporate culture is open to the idea generation. There are various possible ways how a company can encourage its employees to bring ideas and innovation [28]: • Employees should have open space and freedom for their ideas. Giving them time and space is a pure innovation accelerator. • Employees should have freedom in carrying out their tasks. There should not be specific steps stated or directed on how an employee should complete the task. It is better to “leave the door open” and employees will find their way and also, this style increases the chance of developing new ways of processes. • Never punish people because of bad ideas because next time they will be afraid or worried to come up with ideas and it may decrease innovativeness in a team. By this question, we confirmed the innovative mindset within IBM. Challenging employees to new ideas is a crucial factor in boosting innovativeness and it is an essential feature of nowadays’ biggest innovators. In the following figure, we show the result of the question no. 4 (Fig. 7). Similarly to the previous question, we asked employees if the company accepts their ideas, but also if the ideas are implemented as well. The statement no. 5 in the questionnaire was proposed as follows: New ideas and innovations of employees are

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Fig. 7 My company challenges employees to bring new ideas

accepted and implemented. We found out similar outputs as for the previous question and they are presented in Fig. 8. We consider findings as a positive indicator of the innovative mindset. On the one hand, it is necessary to challenge employees to generate new ideas, but on the other hand, it is necessary to complete the process— i.e. transform chosen ideas into real outputs, products, services, improvements, etc. Otherwise, employees would just generate ideas that would not be accepted and implemented and then their motivation would rapidly decrease.

Fig. 8 New ideas and innovations of employees are accepted and implemented

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Fig. 9 I can spend at least 15% of my working time on generating new ideas and improvements

As we mentioned above, Harvard Business Review claims that the most innovative companies have one important thing in common: they allow the employees to dedicate at least 15% of their working time on what they want to do, what they are passionate about or what is an area of their interest [24]. Therefore, we included the similar statement in our survey in order to find out if this phenomenon is valid for the company of our research. Since IBM is considered one of the most innovative IT companies, we expected to confirm the statement and in conclusion, the findings were positive. 30% of respondents strongly agreed and 51% of respondents agreed with the statement, which makes almost three-quarters of all respondents in our survey. The results are stated in Fig. 9. In the question no. 7, we wanted to find out if the employees of the company are creative and innovative. However, we did not want employees to evaluate themselves, but we instead asked about their colleagues because we consider such a formulation more objective. The statement was following: My colleagues are creative, and they bring new ideas to the company. Again, we found out that most of the employees agree with the statement, the results are shown in Fig. 10. In the question no. 8, we found out more ambiguous results. We asked the employees the following: My company provides me trainings and education that support my creativity and idea development. In order to keep a high quality of the workforce, a company should invest in their development. There are three main production factors included in every business: labour, land and capital. Thus, human resources are one of the most important factors of a successful company and when we are talking about innovation, it is even more important to stress out the need of employees to be educated, motivated and trained to be able to bring new knowledge to the company. Based on our findings, 35% of employees agree that they are provided with the training and education that supports their creativity and idea

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Fig. 10 My colleagues are creative, and they bring new ideas to the company

development. On the other hand, 27% of respondents expressed the opposite opinion: they disagreed with the statement. Our research sample contained employees from different departments and therefore it is possible that their education or trainings are focused on different matters. As we discussed in the company, it has recently started to strongly promote Design Thinking which is specifically focused on the creative resolution of issues and requirements of clients. Education related to Design Thinking is available for employees in classroom-based courses as well as through various e-learning options, even with interactive features. To sum it up, if a company wants to maintain or improve its innovativeness, it is essential to teach employees creative techniques and develop their skills and broaden their minds (Fig. 11). In the following question, we focused on internal innovations and the improvement of the internal processes. As we have already explained, innovation management is not focused only on product or services innovation, but also on process innovation. We proposed the statement: My company continuously improves its internal processes. We discovered that the employees do not consider the company as continuously improving their internal processes since 49% of respondents disagreed with the statement and 22% strongly disagreed. Since IBM is one of the largest companies in the world operating in more than a hundred countries, it is clear that the company is strongly process-based. Based on our questionnaire we found out negative results since the opinion of the employees did not confirm the fact that IBM would innovate the processes. However, in scientific literature we found evidence that IBM is also focused on innovation of internal processes, for instance, they decreased the length of the buying and leasing process of computers from seven days to only one day. Also, they reduced the number of processes in the 1980s from 140 to 18 core processes. Furthermore, the company invests time and money to improve these core processes continuously. Another fact is that since IBM is very large and multinational, it cannot focus on all the processes around the world at once and therefore it is putting the most

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Fig. 11 My company provides me trainings and education that support my creativity and idea development

significant effort into the identified core processes. Also, the company has already learned that process innovation is the never-ending process [29]. In conclusion, our research did not confirm the fact of continuous improvement of processes. Only 5 employees (14%) strongly agreed and 3 employees (8%) agreed that the company continuously improves the internal processes. Figure 12 shows the findings of the survey regarding the improvement of the internal processes.

Fig. 12 My company continuously improves its internal processes

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Fig. 13 There are often radical changes in my company

Additionally, in the questionnaire, we included the statement: There are often radical changes in my company. When we looked at the history of the four most innovative multinational IT companies, we found out one common pattern: the companies in their history did a change that completely changed their business and orientation (e.g. IBM sold the whole PC group, Apple introduced a completely new approach to the music delivery to clients, Google brought a completely new model in providing email services). Therefore, we decided to examine if the employees consider the company as willing to undergo radical changes. Our findings partially confirmed the fact that the employees see IBM as exposed to radical changes. Our results express that 27% of respondents strongly agree with the statement and 32% agree with the statement. On the other hand, 19% disagree and 19% of the respondents strongly disagree with the statement. Therefore, in this case, our research reached the ambiguous result (Fig. 13). The last statement in our questionnaire was the following: Our ideas are mostly internal. They usually do not come from customers. By this statement, we wanted to find out if the employees develop the business ideas or if they come from the customers and then IBM prepares a solution based on them. We found that 24% of the respondents neither agreed nor disagreed with the statement, which could be influenced by the fact that they do not come in the direct contact with a customer or product solutioning. Furthermore, 11% of the respondents strongly agreed with the statement and 14% agreed. However, the highest number of respondents expressed the opinion of disagreement since 24% of the respondents strongly disagreed and 27% disagreed. This result gives us the insight that the most ideas for products and services come from a customer, usually in the form of requirements. However, this finding is quite natural because customers know the best what they need and based on expressing their want IBM can also enrich its product/services portfolio. As it was

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Fig. 14 Our ideas are mostly internal. They usually do not come from customers

mentioned in the study by Laursen and Salter, innovation does not flow only from the inside of a company, but it is influenced by external relations with customers, subcontractors, suppliers as well as other producers but, also from institutions [30]. Definitely, the role of a customer is extremely important in the whole innovation process and it was also partially confirmed by our questionnaire in IBM. The fact was also confirmed in the research by Greer and Lei who claim that the customers’ ideas, knowledge and impact have a strong influence on the development of new products [31]. Clearly, companies that are willing to cooperate on the idea generation with customers and suppliers are able to use new knowledge resources for its own development. In recent years, this approach is presented as “open innovation”. Open innovation is based on taking ideas from external partners and using it as an advantage. Our survey, however, did not confirm the full presence of open innovation in IBM, and the results are more inclined to its partial presence (Fig. 14). To sum it up, we discovered the following finding thanks to our questionnaire: • The employees consider IBM as an innovative company and feel its support of new ideas and innovations • The company wants the employees to bring new ideas and the company implements their ideas • However, based on our research, the employees perceive that the company is not willing to take the risk for the implementation of ideas and innovations • Furthermore, we discovered that the employees can dedicate approximately 15% of their working time to the generation of new ideas and they consider colleagues as creative and innovative • On the other hand, employees do not feel enough support regarding education and development and they do not consider the company to be regularly improving its

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internal process. However, we also found out that there are often radical changes within the company. • Lastly, we discovered that new ideas also come from customers, which means that the approach to open innovation is present in the company. We have already mentioned the aspects defined which should form the corporate culture of an innovative company [24]. In our research, we confirmed that the employees in innovative companies are allowed to spend at least 15% of their working time to own development or on their interests. Also, we confirmed that innovation and creativity are present everywhere in the company and that employees consider their colleagues to be innovative and they consider the whole company as innovative. We also confirmed the aspect that customer-driven innovation is encouraged. On the other hand, the type of decision hierarchy in the company is not, according to the respondents in our survey, inclined to take the risk for new ideas. In conclusion, we found out that the corporate culture of IBM possesses factors of innovative corporate cultures.

7.3 Innovation Centre Innovation in a multination company includes a very large complex of activities, processes as well as attitudes which simultaneously contribute to the fact that a company is considered as innovative and that it really creates innovations. Since our research is focused on multinational companies, it is necessary to look at various parts of the company and its processes in order to achieve a complete picture. To find out more about the approach to sustainable innovation in the selected multinational company, we decided to support our research not only by the previously mentioned survey but also by a personal visit in the Innovation Centre of IBM where we conducted a semi-structured interview. The employees of the Centre explained to us the purpose of establishment of the centre, but also its actual situation, and they described the change that occurred in relation to this specific Innovation Centre of IBM. When was the Innovation Centre established? It was established in October 2003 as the reaction to the fact, that Slovakia was understood (by IBM Headquarters) as one of the emerging markets with very high potential for growth in the IT Sphere. What was the purpose of its establishment? When we hear the “buzzword” innovation, we usually start to think about research, new ideas or often the development of new projects. The purpose of the innovation centre in Slovakia was different as Slovakia has very specific IT market – very small in comparison to other countries. Generally, Innovation Centres established by IBM around the world are focused on solving complex IT problems and they are often

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using state-of-the-art IBM hardware and software. In Slovakia, a customer would not be able to pay for such complex solutions and extremely innovative ideas. Therefore, the pain purpose of the centre in Slovakia was to search for independent software vendors who have outstanding ideas and allow them to test their solutions in the centre, as it focused on providing infrastructure. Did this main objective of the Centre change over the years? It is necessary to highlight that, similarly to other parts of the business, innovation is also dependent on finances. Thus, the Centre has to be financed by those departments that are producing profit, because the Centre itself is not able to produce enough revenue for its operation. When the Centre was financed primarily by the hardware department, we focused our initiatives on hardware, when it was financed by the software group, we focused on software. How does the Centre make the profit? Mostly from selling licences. We allowed independent software vendors to test their software solutions on our middleware and usually, they adjusted solutions to be compatible with our middleware and hardware. In the end, when the solution was sold by the vendor, customers had the tendency to buy hardware and middleware from IBM. Thus, IBM profits from selling licences. It is the answer why the Innovation Centre cannot be principally recognized as a generator of internal ideas and innovations, but rather it is an accelerator of the relationship with innovative vendors. It could be understood as a kind of open innovation. Thanks to the new relationships with independent vendors, IBM can get to areas of business where it did not operate before. So, in this way, a software solution can be innovative, but it is connected with the use of existing IT assets. How many IBM Innovation Centres are there in the world? There are currently 34 centres and they are located in many countries. In Europe, there is the highest concentration of the Centres; there are 14 of them. Four Centres are located in the US and two in Latin America, five in Africa and nine in Asia (Fig. 15). But they all can have a different approach to innovations and the business. It also depends on a country. But generally, they all focus on generating the profit by promoting new solutions and especially by allowing to test the solutions. Also, they are the way how to get closer to potential customers, as business partners can use them as an opportunity for the real-life presentation of expensive solutions. Additionally, they provide online and face-to-face training and education to interested companies, which can further cooperate with IBM, which give a chance mostly to smaller companies, who would not be otherwise able to cooperate with this multinational company. What are the benefits for independent software vendors? The first factor is that the Innovation Centres are located worldwide, so an independent software vendor does not have to be limited by the location. The Centres offer workshops and training aimed at cloud computing, analytics, social solutions for

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Fig. 15 Locations of IBM innovation centres

clients, etc. They even are not charged and therefore they offer a beneficial way of acquiring new information and knowledge. Moreover, the Centres give vendors the access to systems (even remote), which would be otherwise extremely expensive. So, vendors can improve their potential by acquiring new information—even from salespeople, subject matter experts, etc. It is easier for them to get closer contact with the right clients. If there is any cooperation with a successful independent software vendor who is generating innovative ideas or solutions does IBM ted to acquire such a company? IBM usually does not make acquisitions of such vendors, but it rather increases its profitability by cooperating with these vendors as they usually promote our hardware or mainframe solutions. Is there anything special about the Innovation Centre located in Slovakia in comparison to other worldwide Centres? The Innovation Centre in Slovakia does not have so many vendors to cooperate with and also there are not so many clients who would be interested in testing innovative solutions on the infrastructure which is available. Therefore, its operation is slowly decreasing. Basically, the newest innovations are not generated in Slovakia, but rather in research labs in Zurich and Austin. The Centre in Slovakia was established with the specific purpose; however, this purpose is not so productive anymore. Is there any long-term strategy that the Centre follows?

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Currently, there are not any strategic impulses at the Centre in Slovakia; it does not plan to carry out any specific activities in the following years. What is the main contribution of the Centre to the long-term innovativeness of IBM? The approach to clients and independent software vendors is very specific since multinational IT companies usually do not pay attention to start-ups and small companies. Therefore, this attitude can be understood as a type of support for stabilization of longterm innovation of IBM because by this way IBM assures long-term partnerships with partners, start-ups and innovative vendors.

7.4 Deduction from the Interview in the Innovation Centre Establishment of innovation centres in companies is a conscious managerial and strategic decision, which should be supported by a long-term business plan with specific objectives and managed processes. Otherwise, such establishment may produce only costs and no revenue or added value. The interview in the Innovation Centre revealed that currently it is not very well managed and that its activities are not very purposeful. In addition to this, there are no future plans for any activities, there are no specific objectives set and thus its contribution to the innovativeness of the whole company lacks the purpose. However, the main idea to find potential small innovative vendors in the market is a remarkable approach to increase innovation. On the other hand, it is necessary to develop long-term management of these relationships in order to get desired benefits of the idea. The interview showed that the existence of the Innovation Centre might be threatened.

7.5 Innovation Hubs Another part of our research is the analysis of tools used to boost the innovation process in the selected company. In addition to the previous survey and visit of the Innovation Centre, we further extended our research with the overview of tools enhancing innovation creation and gathering. In order to increase the idea collaboration and strengthen the innovation process within business communities, IBM established internal Innovation Hubs. These are internal web pages and tools for employees, where various topics are discussed, and employees can contribute with their ideas and everybody is welcome to add an opinion or idea. The establishment of innovation hubs is consistent with one of the IBM values—“Treasure the wild ducks”—which means to accept even extraordinary ideas and contributions of employees because those can bring the success to the whole company. In Innovation Hubs, IBM prefers to implement the theory of “Managed Anarchy Model” by Gartner, which enables the generation of a higher number of great ideas over the time. Unlike the “Conventional Model”, the Managed Anarchy

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Fig. 16 Conventional model versus anarchy model in innovation hubs

Model enables to avoid the idea degeneration by management (so-called death by management selection), but rather prefers death by natural selection, when better ideas outperform worse ideas and there does not have to be any managerial input, which would be responsible for decreasing the number of generated ideas (Fig. 16). However, there are few things that are managed by innovation managers—tools, which are provided to the employees in order to be able to generate ideas on one common place, for example, IBM uses the Lotus Connections Community template, Ideas applications, the ThinkPlace web page, and recently internal social media are very common and popular among employees. Regarding the internal social media, IBM has several of them, but for the idea generation mostly Communities are used, where employees can interact with each other, contribute to topics and also develop own blogs, which can be commented by others. The Innovation Hub applies the circle of idea generation, which is presented in Fig. 17. Currently, the membership in the Innovation Hub is up to 10% of the employee population, but the number is constantly increasing. The submission of new ideas has been increasing by approximately 20% annually. Ideas are usually connected to the areas such as operational efficiency, predictive analysis, enterprise data and IT needs of employees. Figure 18 shows the interface of one of the innovation tools [32, 33]. In IBM, there is applied a specific innovation process and Innovation Hubs are a crucial part of it, especially during the phase of idea generation and collaboration. It means that Innovation Hubs stand almost at the beginning of the whole innovation process and they are the influencing factors that enable the company to generate new ideas constantly. Thanks to the Innovation Hubs, IBM is able to use ideas from all employees around the world. Since it is the multinational company, it is necessary to connect people, because as a team they can generate new ideas on a better level. Thanks to the Innovation Hubs, IBM is able to use the fact that it operates in so many

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Fig. 17 Innovation Hub—idea generation circle

Fig. 18 Innovation tool interface

countries—it can profit from collaboration. Innovation Hubs are therefore a very crucial factor when a company wants to be innovative in the long run. By increasing the number of generated ideas and employees included in the process, IBM is able to generate new ideas constantly, which can later be transformed into innovations (Fig. 19).

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Fig. 19 Innovation process in IBM

8 Discussion and Conclusion In the research, we focused on the sustainability of innovations in multinational IT companies. There are several companies, which have been annually announced as the most innovative, and our aim was to discover if there is anything special what these companies do in order to accelerate and keep their innovativeness. We specifically focused on two main areas, which we consider as strong factors impacting the sustainability of innovations: • Investments in research and development • Specific factors of corporate culture. The basic pillar of our research was the determination of those multinational IT companies that are recognized as the most innovative. Inspired by the research of Jalles and Narin and Noma, we analysed the number of patents, its annual increase and also the connection of this factor to published lists of the most innovative companies [9, 10]. We found out that the number of registered patents can be understood as one of the indicators of a company’s innovativeness. The results of our analysis confirm that innovative companies tend to increase the number of patents, especially from the long-term point of view, and thus this increase can be an indicator of future ability to be innovative. We also found out that the number of registered patents is not related to the age of a company. However, the number of patents is not the only indicator that tells if a company is innovative or not. There are definitely many other factors and they are usually included in the research methodology of publishers who annually report the lists of the most innovative companies. Since all of these publishers use different methodologies and value various factors differently in the final ordering of innovative companies, we compared the lists of four publishers and added our order based on the number of patents. The comparison resulted in the list of four most innovative multinational IT companies, on which we focused in the further analyses. After the selection of the four most innovative IT companies, we analysed their investments in research and development and the influence of the investments on long-term innovation. Our findings show that the absolute values differ, but the annual increase in investments has been steady for the individual companies. After the comparison of the companies between each other, we found similarity between

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Google and Apple that has been increasing absolute investments in R&D more rapidly in the last five years (on average by 27% and 36% respectively). Additionally, we found that Microsoft did not increase the value so rapidly, but their trend is to keep an annual increase of around 7% (on average). Surprisingly, the absolute value of investments in R&D in IBM showed an average decrease of 2%. On the other hand, IBM has been the leader in the number of patents for several years and despite the company decreased the amount invested in R&D it was able to keep a stable increase in the number of patents (on average by 6% annually). IBM appeared in several lists of the most innovative companies and thus we can conclude that we did not confirm the relationship between R&D spending and innovativeness, especially in the case of IBM. On the other hand, IBM implemented innovation hubs, which are tools for all employees to participate in the innovation process. Basically, it is the way how IBM can accelerate its innovativeness without high R&D spending. In the case of Apple and Google, it appears that the absolute value of their investments has an impact on the increasing number of patents. Apart from the absolute value, we compared R&D of total Revenue Ratio. The ratio shows the share of R&D spending on the total value of revenue generated by a company in a particular year. Based on our findings, we can say that the chosen companies have the tendency to keep the ratio stable and we cannot confirm that there would be a specific value of the ratio that would assure the long-term innovativeness for a company. Based on the example of Apple, which is for several years recognized as no. 1 innovator, the ratio has been on average 2.61%, while Google keeps on average 13.64% and it is for several years published as the second-best innovator. Therefore, we did not confirm the straight connection between R&D investments and sustainability of innovations. Apart from the investments into research and development, we reviewed business models of the four companies from the long-term point of view. We found out one important similarity—IBM, Google and Apple were not afraid to come with a disruptive change in their business models during their history and also, they accepted the risk of entering the market with a completely new approach to a product or services. Based on our analysis, we found out that the risk tolerance is an important factor when we talk about the long-term innovativeness. Even though a company is wellknown for some product, it does not mean that it has to produce it forever when it is not profitable anymore and especially when an old business model is distracting the company from developing new innovative products. Similarly, if a company wants to be innovative it must overcome all barriers and do not be afraid of the risk to present a completely new attitude to products and services. The corporate culture is another factor, which can positively or negatively influence the sustainability of innovativeness in a company. The corporate culture is a phenomenon widely spread within a company, mostly invisible for employees, but very powerful. We carried out a survey in IBM where we asked 38 employees about their opinion on statements that we have proposed in the questionnaire. The results that we acquired suggest that the company’s corporate culture has a positive influence on the long-term innovativeness. We found out that employees consider the company

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innovative, they feel that the company requires them to develop new ideas and innovations and it is an important factor which can assure the long-term sustainability of innovations. We also found out another important factor—employees can dedicate approximately 15% of their working time to develop their working interests, bring new innovations, or improve processes. Basically, the company leaves them space to focus on what they like, but on the other hand, it is a great source of innovations and improvements for processes, services or products. Supporting literature also claims that Google has the similar approach to employees and that this factor can have a strong influence on innovations generated by employees. We also discovered that there are often radical internal changes within the company, which suggests that fear of change is not present and thus the barrier for innovations is limited. On the other hand, our survey did not confirm that the company would be willing to take the risk for innovations and we found out that this could be a limiting factor in the case of long-term innovations. However, this finding can be influenced by cultural aspects since our research sample did not cover all the countries where IBM operates. In addition to the survey, we visited the Innovation Centre located in Slovakia where we found an innovative approach to clients and suppliers. The Centre itself is not focused on the primary production of innovations; it is rather aimed at searching for small innovative and independent vendors that will combine their solutions with IBM middleware and hardware and by this way IBM increases its stability in the market of innovations. This approach can be understood as the application of open innovation. In addition to this, we described another important approach to innovations which is present in IBM—innovation hubs. The innovations hubs in IBM aim at attracting as many employees as possible in order to accelerate the generation of new ideas, products, services, improvement of processes, etc. IBM uses many internal tools where employees can contribute with their innovations or opinions and we consider it as a very important factor in achieving the sustainability in innovativeness. To sum it up, based on our research we can conclude the following factors that we consider as the most important in the case of long-term innovativeness of multinational IT companies: • Investments in research and development can have a positive impact on the generation of innovations, however, they should not be considered as primary factors influencing innovativeness • Companies cannot be afraid of changing the business model, even if the change is disruptive, because otherwise they would not be able to focus on what is important—new products, new innovations—and thus they cannot secure the long-term innovativeness • The corporate culture cannot be underestimated. Employees must be requested to contribute with new ideas, management must accept their ideas, discuss them and if they can have a positive impact then it is necessary to implement them. A company cannot be afraid of taking the risk for new innovations. Employees must be sure that their ideas are wanted by their company and that it is worth to be innovative.

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• Employees should be allowed to spend a certain ratio of their working time focusing on the area of their interest—it gives them space to come up with new improvements and ideas. • For an international company, it is necessary to establish internal tools (webpages, social networks, innovation hubs) where employees can contribute with and discuss about new innovations, where they can learn about new trends. For a company it is an extremely valuable source of achieving long-term contributions of new ideas, which can be further transformed into new products or services and thus they can assure a company’s sustainable innovativeness [34]. Based on our findings we cannot directly say that a specific percentage of total revenue invested into R&D would have a significantly positive impact on the longterm innovativeness. However, we discovered similar aspects between the four chosen multinational IT companies, which ratios we calculated. We did not discover that companies would be rapidly increasing investments into R&D in order to become more innovative.

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eServices and Gaming Industry—Value-Creating Ecologies as Main Factor for Customer Acceptance of Digital Servitization Alex Vladorchuk, Michaela Schaffhauser-Linzatti, Marian Mikolasik, and Iryna Ivanochko Abstract Digitization of business has made it possible to provide customers with eServices on an everyday basis. The servitisation and digitization have also raised the importance of public mechanisms and made this as important as market mechanisms in the game industry. Thus, this work shows that the development of value-creating ecologies can be considered as the main factor for the customer acceptance of servitization in the creative industries. And regarding servitization, it is important to design services in a way that they can generate additional value even for those customers who do not consume such services. It is important to enabling the customer to become a cocreator having him involved as a partner in this process.

1 Introduction Even though the terms eProducts and eServices are not new and have already been clearly defined in scientific literature, we can observe combinations of them in today’s eBusiness landscape or even in the global shift from eProducts to eServices in particular industries. Today, this shift is clearly seen in the game industry. More and more game developers and publishers offer their games not simply as complete products but as long-life experiences that require constant support and development of additional content, the release of patches, in-game boosts, and in-app purchases as loot-boxes, skins, emotes, energy, and many others. This means that the final product for game developers has shifted from an eProduct to a product-service platform [1]. The size and tempo of the growth of the game industry make it a valid example of this shift from eProducts to eServices. In the past 30 years, interactive games have developed from “entertainment for children” into a “grown-up” business, the revenue A. Vladorchuk · M. Schaffhauser-Linzatti · I. Ivanochko University of Vienna, Oskar Morgenstern Platz 1, 1090 Vienna, Austria e-mail: [email protected] A. Vladorchuk · M. Mikolasik (B) Faculty of Management, Comenius University in Bratislava, Bratislava, Slovakia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_17

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of which reached an estimated $96.5B in 2017 and is predicted to reach $123.5B by 2021 [2]. Digitalization of global business and of all sides of particular businesses has made it possible to provide customers with eServices on an everyday basis. For game developers, this means that they can provide gamers with additional content as soon as it is released or even with parts of this content during the development phase (for example, the Early Access model). It is now possible for gamers to have constant access to in-game purchases. More crucially, the digitization of gaming has raised the importance of public mechanisms and made this as important as market mechanisms, leading us to the second part of this work: Value-creating ecologies. This parallel shift of customers from consumers of eProducts to co-creators of value makes developers and publishers concentrate more on network value than on product value [3, 4]. Considering that a digital product reaches its critical mass of users and becomes more valuable for every single user, provided eServices become even more valuable. This means that from a certain point in Value-creating ecologies, eServices that can be provided within an eProduct prevail over the eProduct itself from an economic point of view, especially in the game industry. Servitization of the gaming industry is meant to enhance the user experience, add value to a product, and increase both customer loyalty and revenue generated by product-service bundles [5, 6]. In fact, research, as well as examples from the industry, show that the process of servitization is equally as challenging for companies as it is for customers. The coexistence of products and services in one bundle brings an element of ambivalence into the context of servitization [7, 8]. Servitization is relevant for modern businesses as it challenges companies’ traditional organizational values, structures, and business models [9–11]. In other words, companies face difficulties in merging products and services, as product design and service design require different approaches at their cores. In a servitization context, service must be meaningfully implemented into a product-service bundle and add value to the whole system [12]. This additional value should also be understood, visible, and accepted by customers. Customer acceptance of servitization is also a big topic for industries, which were traditionally focused on product value and offered their customers tangible goods at a fixed price. The gaming industry is also an illustrative example of such a shift, as games were traditionally positioned as products, and customers paid a fixed price for software, which they could use (or play through) “from beginning to the end” without the necessity or possibility to consume additional services associated with the product. In recent years, we have seen several examples of successful servitization of games, which has been accepted by customers and resulted in the increase of revenue generated by product-service bundles. There have also been unsuccessful examples, where the service aspect was not accepted by customers and revenue generated from additional services was not high. Both types of examples will be covered in the following sections of this work. Servitization of creative industries is even more challenging for companies because of their interaction-rich character, which increases the importance of

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understanding how customers consume additional services [13, 14]. Interactionrich businesses establish more connections between product/service providers and their customers and between consumers of products/services, which has led many researchers to the idea of considering business environments as ecosystems. This also shifts the understanding of value creation and co-creation from company-centric to customer-centric [15] or even network-centric. In that sense, companies play the role of moderator, building an environment and giving customers tools for value co-creation, regulating their interactions, and moderating their sense of social presence, resulting in better evaluations of e-service quality [16]. The question is what tools of value co-creation are already implemented into the product-service bundle and what kinds of interactions between customers are “allowed”, in other words, how developed the value-creating ecology is. This leads us to the first research question of this paper: Can the development of value-creating ecologies be considered the main factor for customer acceptance of servitization in creative industries?

To succeed in this work and to answer the research question, it is essential to start with professional literature research and cover the theoretical aspects of eProducts, eServices, and Value-creating ecologies. In order to understand the global shift in value creation and to determine the theoretical frameworks of the research, not only will professional literature relative to the topic of the paper be considered, but also internet sources, statistics, and interviews. The theoretical frameworks and methodological key factors determined by the literature review will affect the findings, interpretation of these findings, and results of the research. Therefore, old scientific papers will be analyzed in combination with new ones to establish existing theories and the relationships between them regarding the researched topic. If any gaps in the existing theories and hypotheses are revealed, they will also be highlighted in this paper. The connection between servitization, digitization, and social value co-creation in creative industries, such as the gaming industry, will also be covered in the literature review. It is relevant for this research to find correlations between the development of value-creating ecologies around specific products, customer acceptance of servitization, and customers’ willingness to consume additional services after purchasing a product. The literature review aims to find classifications and typologies to measure the grade of servitisation, value co-creation, and development of value crating ecologies. Measurement tools will help carry out a product analysis and find correlations between the researched factors as proof of concept. Due to the shift of value perception from company-centric to customer-centric, it is also important to understand how value is co-created in value-creating ecologies and how product-service bundles should be designed in order to maximize added value. This question has economic relevance for companies as the maximization of value generated by additional services can also increase customer willingness to consume these services and, as a result, their acceptance of servitization.

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The customer-centric approach and the shift from product value to network value underlines the importance of keeping an ecosystem healthy consistent, as the health of the ecosystem directly influences the satisfaction of each individual within the system [17] and determines the success of implemented services [18], which can result in the increase of customer acceptance of servitization. For that reason, it is important to understand how products/services should be designed to increase the value of a bundle for the whole value creating ecology. Therefore, the second research question of this paper is: How should services be designed in order to increase the value of a productservice bundle for value-creating ecology and to increase customer acceptance of servitisation? For this question to be answered, a theoretical framework needs first to be established. It is essential to find a concept that will help measure value co-creation and distribution of product/service value among actors within the ecosystem.

2 Servitization and Gaming Industry 2.1 E-Service Definition There are many different definitions of eServices. Most of them concentrate on various aspects, characteristics, or production processes. The problem lies with the fact that these definitions are broadly used in economic theory and practice, but there is no commonly accepted, generalized term. Some of these definitions are focused solely on the most common and researched aspects of eServices, such as e-learning, e-government, and e-commerce, which are not easily classified. Therefore, this work will make a comparison of existing theories and research of current classification models. The development of information channels and communications technologies have made it possible to provide services through these channels. One definition which is broadly used nowadays describes eServices as services that are provided over the internet with the possibility of making a transaction through the same electronic channel [19]. Some definitions are narrower in terms of services that can be characterized as eServices and defined only as web services provided through the internet [20]. Some research defines eServices as any kind of activity and interaction between provider and customer through any electronic channel [21], which correlates with the definition provided by local European governments, which define eService as a service provided electronically. The European Commission defines eService as a service delivered over the internet, involving minimum human interaction and which has no value in the situation of unavailability of information technology [22]. All these definitions agree on the importance of the internet and internet-based communication technologies in eServices. At the same time, some research shows that eServices can also be provided offline, for example, through text messages, Bluetooth, or radio-frequency identifiers [23].

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Recent research provides a more general definition of eServices, describing “eservices as activities provided by the provider to a recipient; these services are nonmaterial; they are provided by means of information and communication devices, and the result of their consumption can be a benefit, service or acquisition of property” [23]. This definition broadens the end result of e-transaction from the concentration on the obtainment of service to the gain of benefits or acquisition of property.

2.2 Classification of eServices Classification of eServices and eProducts is also a topic which researchers address. The classification helps understand customer behavior and how they perceive eServices and the required, or at least expected level of co-creation of a service. Sheth and Sharma [24] provide a two-dimension classification of eProducts and eServices (see Fig. 1. [24, 25]). The first dimension is “the degree to which the product or service can be digitized” or the digitization level; the second dimension is the co-creation level, meaning the degree to which the provider of a service and the customer can interact in order to co-create or adjust the product or service for personal needs. Some products or services cannot be changed or adjusted by customers. At the same time, many allow customers to create their own outcome examples and co-create value.

Fig. 1 Classification of service and product [24]

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According to this two-dimension table, games are classified as eProducts/eServices with a high level of digitization and a low level of co-creation. Hamed Taherdoost et al. [25] also provide the analysis of eService applications, based on questionnaires distributed among 172 e-Service users, which shows that eProducts/eServices with a high level of digitization and low level of co-creation are used more by customers than other types of eProducts and eServices [25]. In conclusion, the authors affirm that customers are more likely to consume eServices with a high digitization level and a low level of co-creation. As a result, it is expected that providers of such services are reaching the maximum level of penetration. This is even more expected in industries dealing with creative products like music or video games. Moreover, if such companies do not supply these services, it may result in becoming less competitive in the market than those who provide eServices.

2.3 Servitization of the Game Industry Nowadays, more and more companies generate a large percentage of revenue through after-sales services, which supports customers who have bought their products and bears several opportunities for a company to add value to their product-oriented PSS and customer value [26]. This concerns not only eBusiness but also manufacturers who produce physical goods and offer additional support for customers. This strategy is not new and has already been broadly discussed. Through the integration of product and service offerings, companies aim to generate more value for these products’ consumers. A review of the literature shows that servitization has been conceptualized as an external force that leads companies to the implementation of services in order to gain competitive ground [27] by offering “bundles”, combining goods, services, support, self-service, and knowledge [27], reorganization of business processes to shift from selling products to selling PSS [28]. This means that the generalized concept of servitization is characterized through the following features [29]: • changes in the positions that firms occupy in their industry value stream; • changes in the types and scope of the firm’s market offerings; • the shifting orientation from product-focused service towards dominant or customer-focused business models; • observed or required changes in the structures, capabilities, and relationships at the organizational and network level. The transition from product-based business to the implementation of services is common for different concepts of servitization. The development of technologies and communication channels has made it possible to digitalize creative products traditionally associated with the analog

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medium, even though the products themselves may have been digital (music, software, video games). In the case of creative industries, physical retail has been replaced by online service platforms and have engaged with servitization. Servitization has shifted traditional customer-producer relationships [30] in which customers exchanged money for product ownership, for example, an audio cassette or CD which contained the product itself. It has also created a new paradigm that replaces classical “ownership” with value-in-use. Many service platforms now provide customers with usage rights instead of possession of property [31, 32]. Value-in-use is not a new term, and whether digitalization of a product does not bring any value of ownership of an analog medium, the only value of consumption is left. A digitally downloaded music track only has value when the customer listens to it or at the moment when the product is consumed. The same principle can be applied to digital copies of video games. It is also wrong to reduce value-in-use to value of consumption. Macdonald, Wilson [33] point out that understanding value from a customer’s perspective is important. They, therefore, define value-in-use as “a customer’s outcome, purpose or objective that is achieved through service,” which is created by the provider, customer [33], and customer to customer as well as the customer to provider interactions [33]. Value-in-use relates to the means-end theory, which suggests that the product and/or service is attributed with goals - benefits, risks and/or individual or organizational values - which the product and/or service helps to achieve [34]. Goals are set by individual mental models according to the actions of individuals as well as the outcomes of their goals; thus, building goal chains. Gutman [34] takes the example of coffee-drinking to describe such goal chains. The primary goal of drinking a cup of coffee is immediate refreshment for the coffee drinker. A cup of coffee can, however, enhance other activities for the coffee drinker, e.g., studying. The act of studying is performed in order to obtain the next goal, such as positively passed exam [34]. In this way, the simple act of consuming coffee leads to the achievement of further goals. Each goal is hierarchized according to its value, and customers are ready to pay for certain attributes because of the association of these attributes with higher goals [33]. This framework can be applied to the usage process: if a customer co-creates value by using a service, it is expected that the customer’s mental model includes this usage process and their relationship to value-in-use in the customer’s goal hierarchy [33]. Servitization enhances the value of digital products through greater interactivity on social media [35]. This activity allows communication between different parties of the industry with their customer base and between the consumers of products and services. This allows for further contribution in value creation [36]. This innovative approach to co-creation of value changed customer experience in the music industry some years ago [37, 38], and the same changes can be observed nowadays in the game industry. Consumers of eProducts can change from the role of passive consumer to participating actor both in the development of products and through the exchange of individual user experience with developers and other consumers in order to shape future outcomes and contribute to value co-creation [39]. In the game industry, the role of social media as a main tool for customer communication decreases as players

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can use in-game resources for social activity. Aspects of value co-creation in the game industry will be covered in the following sections of this paper. If we consider servitization as a shift from the strategy of the offer of goods and end products to the offer of bundles of goods and services [40], which research suggests is the best way for manufacturers to develop their strategies [41, 42], we will see a conceptual shift to the selling of complete solutions [43]. These comprehensive solutions have already existed in the music industry for many years (iTunes Store). At the same time, the game industry has had a long way to go in terms of communication capabilities due to a large amount of transferred data. Differences between products and services and their characteristics are clearly defined in the scientific literature (Porter, Baines, Demsetz, Bowen, Gadrey) [9, 42–45], though their practical integration is still an ongoing topic. The problem is that companies are still defined as product based or service based with respective management organization. Difficulties in business structure appear when companies that were traditionally organized as product-based companies start shifting their focus from products to services. These difficulties have been observed in recent years in the game industry and have led to losses for game developers due to the inappropriate integration of eServices into eProducts.

2.4 eService Systems Servitization of the game industry has led to a shift from the logical concept of a game as an all-in-one software to an eService system that offers an enhanced service experience. In theory, enhanced service experience may lead to a higher level of customer satisfaction and, as a result, an increase in revenues and profitability [46]. Even so, the development of service platforms can be challenging [47], especially for an industry that was traditionally focused on the development of all-in-one software without integrated service solutions. Another aspect of the shift from eProducts to eService systems in the game industry is the global shift by digital product developers from mass production to mass customization [48]. In that sense, [49] refers not only to material flow but also to social and cultural factors that shape the process of servitization. Companies aim to offer mass customization to customers in order to satisfy individual requirements while keeping near mass-production efficiency [50]. For this reason, many companies have strategically changed course from the game-as-product to the game-as-service model. These changes now apply not only to free-to-play or freemium games but also to games which customers buy at full price. At the stage of game development, integration of services affects the system (product itself) and vice versa [12]. This can have a negative impact on the game, and as a result, on user-experience In her research, Rowley [51] comes to the conclusion that eService predominantly contains characteristics of self-service. This means that the customer, at the moment of service consumption, takes on the role of co-producer of that service [52]. As a form of self-service, eService poses difficulties for developers of service platforms when it

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comes to customer engagement. Users of service platforms often have difficulties in identifying features they want [52]. It, therefore, becomes a challenge for developers of service platforms to develop platforms that engage customers in self-service [53, 54]. Even actively contributing to customers with knowledge and skills in the process of development does not always address their expectations. It is often the case that customers fail to request essential capabilities [55–57]. In the game industry, this can be observed in crowdfunded projects and in early access business models, when even in the case where developers actively collect feedback of users and their requirements, finished products fail to pay off and result in negative feedback from customers. As a service platform, and keeping in mind the “creative” aspect of the industry, game design is even more challenging, involving not only technical programming know-how but also knowledge of other fields: arts, engineering, humanities, education, computer sciences, etc. [58]. Currently, most games are developed without direct contact with customers, and decisions on game design are mainly based on investigations in ludology, psychology, anthropology, and design in order to fulfill customers’ game experience expectations [59]. This problem concerns not only classical entertainment games but also games that acquire knowledge in diverse areas (Simulation Games, Persuasive Technologies, Game-storming, and Gamification) [60–62]. For these reasons, game development, which has shifted towards a servicedominant logic [32, 63], has started to concentrate on the customer’s point-of-view with a focus on revenues and profitability employing design thinking principles [64]. This means that games that focus on revenue generation from eServices and which can no longer be characterized as pure eProducts can be defined as eService systems with experience-centric services [32, 63], which increases the importance of proper integration of services at the stage of game design [65, 66] and which is described in Fig. 2. If we consider Games as an eService system and not as a purely digital product anymore, we can observe an analogy with recent changes in other markets, like the music market. Developments in the servitization of the music market clearly show the influence of social mechanisms integrated into eService platforms. Acceptance

Fig. 2 eProduct and eService system

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of a new paradigm of music distribution was highly affected by integrated solutions for social interactivity and value co-creation. One of the goals of this paper is to cover the topic of the influence of integrated tools for value co-creation on the success of the implementation of new business principles and changes in the positioning of products as eService systems on the market. For this reason, it is important to define specific requirements for analysis of social involvement and value co-creation as well as the grade of the shift from product-based business model to service-oriented systems.

2.5 Product-to-Service Transition Manufacturing companies have come a long way on the product-to-service continuum to transform company strategy from the offering of products to selling combined solutions [7, 8, 28, 65]. Companies have had to accept the double focus: on products and on the extended service offer for customers [66, 67]. In strongly digitalized creative industries like music stores, digital book purchasing, or the game industry, many factors differ from those in physical manufacturing. When a customer buys a physical product, they acquire valuable personal property, which the customer can use, resell, lend or give away. When dealing with digitalized products, the customer usually signs an End User License Agreement, which does not offer the same ownership rights. Most End User License Agreements do not give users any property interest and the owners of intellectual property - developers and publishers - have the right to terminate access to the game at any time. In terms of servitization, customers do not pay for the product, but rather for access to servers, support, and the intellectual property of others, etc., which can be considered as intangible personal property [68]. More important are the changes in the course of positioning from product to service-oriented offers. Product and service orientation is determined by the company’s position on the product-to-service continuum [67] on one end of which products or physical goods are more important and on the other at which services are of more importance. In other research, service orientation is considered according to the broadness of the offer (number of customers to whom services are offered and number of offered services) and to its emphasis (activeness or intensity of offer) [9, 69]. On the product end of the product-to-service continuum, customers deal with standardized outputs, low customer involvement, and separation of production and consumption characteristics. On the service end of the product-to-service continuum, characteristics of intangible and customized outputs, greater customer involvement, and simultaneous production and consumption are implied [70]. Due to this orientation, a shift in the game industry can be observed in terms of product-service orientation from retailing of digital copies or copies on a physical medium, which was positioned as finished products, which customer could buy and consume all content

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“from beginning to the end” without necessity or possibility to get additional services in order to enhance the user experience, to the modern approach, when customers, in many cases, get access to a digital environment where they are involved in the offer of additional services in order to enhance the user experience, customize product and change its characteristics. In this study, the analyzed products will be chosen according to the relative focus placed by companies on products or services and on standardization or customization. The shift of orientation from products to services raises a conflict of the coexistence of two conflicting forces: product orientation and service orientation [1, 71–73]. This conflict appears on both sides: on the side of developers and on that of customers. Customers are not ready for this coexistence and not willing to pay for additional services in games, which were positioned as finished end products for a long time without the necessity for additional payments if the extra value was not evident for them [5, 74, 75]. At the same time, companies face difficulties in areas of organizational values [9], capabilities [76], structures [11], sales [77], and business models [10]. The shift in the positioning of games from products to product-service systems enhances competitiveness and secures sustainability [6]. In fact, the gaming industry’s servitization allows developers to create added value in terms of fulfilling customers’ needs, enhancing customer loyalty, and following customer needs, which leads to faster innovation progress. This coexistence brings ambivalence into the context of servitization [7, 8, 28, 67]. It is represented by two forces that are meant to work in collaboration, but in fact, require different approaches and are influenced by different behavioral mechanisms. The grade of servitization can be determined by the positioning of a company on the product-to-service continuum. Researchers propose different types of productservice systems [78–80]: • Product-oriented services. The company is still mainly focused on revenue generation from selling products, but certain extra services are provided for customers. • User-oriented Services. The company’s revenue is generated from products, which are not handed into the customer’s ownership but are made available for a particular user or shared between multiple users. • Result-oriented services. This type reflects customer-provider relationships where both sides agree on a specific result of service without the involvement of a pre-defined product. Tukker et al. [6] enhance these three types of product-service systems with an eight-dimension typology system for diverse product-service systems within the above-mentioned categories according to different economic and environmental characteristics, see Fig. 3 [6]. Product-oriented services are divided into product-related services and advice and consultancy, where product-related services describe the business model when after purchasing a product, the customer is offered additional services in the form

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Fig. 3 Main and subcategories of PSS [6]

of a maintenance contract or the supplying of consumables. Advice and consultancy reflect customer-provider relationships when after selling a product additional consultancy is offered, which can be related to the effective usage of a product, e.g., structural reorganization, logistics, etc. Use-oriented services include product lease, product renting or sharing, and product pooling. Product lease is a type of service where the product stays in the ownership of the provider, who is responsible for maintenance and repair, and the customer pays for individual access to a product and its usage. Product renting or sharing is a type of relationship where customers pay for access and usage of a specific product but do not get exclusive usage rights. Instead, the product is used by multiple customers sequentially. Product pooling involves the simultaneous use of a product by multiple users. Result-oriented services are divided into activity management/outsourcing, pay per service unit, and functional result. Activity management/outsourcing is a type of product-service system where a service provider outsources part of the company’s work. This service can also be connected with products, for example, in catering. Pay per service unit is a category where a service provider owns a product, and the customer doesn’t gain access to the product itself. Instead of this, a result of an output of the product is provided by the company to the customer. The functional result is the type of provider-customer relationship where a specific outcome of service is agreed upon. The provider of a service is free in choosing how to deliver a result and can use any type of product that may be suitable for the specific customer situation. These eight types of product-service systems proposed by Tukker, Hines, and Marin [6] help to identify the position of a company (or specific product-service

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bundle) on the product-to-service continuum, where the first types are more influenced by a specific product as the core component of a system. Along the way to functional results, the product itself does not have much value in a bundle, and the demands of customers are formulated in a more abstract manner. It also shows that on the path from product-related systems to systems with a functional result, the provider has more freedom in the choice of ways to satisfy customer needs. In the game industry, product-service bundles are more complex. On the one hand, the product itself still has a core value for customers, and on the other hand, users do not buy a product but pay for access to it, which is often shared with other users. Advice and consultancy are usually also implemented in product-service systems in the form of customer support, where a support team consults users in order to help with setting up a system (for example, P.C. operating system or internet connection) for a better user experience. Some product-service systems in the game industry also offer specific services to customers, for example, the Battlefield “Rent-a-Server Program” where for an additional benefit, users can rent a server for a period of time to enhance user experience and adjust different gameplay aspects such as server name, maps rotation, game modes, gameplay setups, and modifications. This means that nowadays, in the game industry, we deal with mixed product-service systems, which include different features, ranging from advice and consultancy to product pooling. At the same time, most product-service systems in the game industry range from product lease to product pooling with elements of advice and consultancy. Three types of user-oriented product-service systems differentiate not only in the influence of a specific product as a core component of a bundle but also in users’ social involvement. Product lease supposes individual usage of a product with low social involvement during the usage phase. On the other hand, product pooling is connected with high social participation at the moment of usage of a product, which means a high grade of value co-creation for other users of a product. In that sense, single-player games without the social component implemented into the product itself are mostly characterized by the product lease type of product-service systems, and multiplayer games or games with a multiplayer feature can be characterized as the product pooling type. Before, customers’ needs were satisfied through the supply of specific products. This meant that companies were concentrated on the manufacturing of products and followed by the selling and delivery of these products to the customer [8]. With the development of product-service systems, the concept of goods-dominant logic and the understanding of value creation for customers has also shifted from value-in-ownership to value-in-use [71]. Tukker [6] considers servitization as a way to increase a company’s revenue through the addition of additional services to products, which can make customers pay more and for a longer period of time. In this sense, “added value” is supposed only in the context of achieving higher exchange value of a product, which is only one level of value creation. Lapierre [81] suggests considering value creation on two levels: the first level is value created during an exchange transaction, and the second level is revealed after the transaction is complete, which is value-in-use. The second

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level of value is attained with skills, customer or provider activity, and resources applied to a product [31, 32]. The logic of value-in-use or user experience is more customer-focused, ambivalent to the goods-dominant logic, and is more concentrated on outcomes provided by the product usage or service activities, which corresponds with the idea of productservice systems as bundles. Following this logic, Smith et al. [8] draw on the work of Pawar et al. [82], identifying three challenges of product-service systems: (1) (2) (3)

offering the value proposition to support collaborative value co-creation; designing the operating system; delivering the value.

Smith et al. [8] assume that in product-service systems recognizing value-inuse, value is no longer determined by the provider, which is in opposition to the goods-dominant logic. In the case of product-service systems, the customer does no longer plays the role of recipient of value, which is determined, designed, and delivered by the provider. Companies cannot define value but propose it with the following realization through co-creation with the customer, which means that they don’t “satisfy” customer needs, but collaboratively support value co-creation [8]. This shows differences in approaches to the analysis of product-service systems and product-dominant businesses. Much research still applies goods-dominant logic to product-service systems (for example, [6, 82]). The main problem here is that the goods-dominant logic deals with the concept of utility, which is not the same as valuein-use. Utility logic considers the customer as a passive recipient of designed values whose only concern is to estimate a supply source according to product benefits. In product-service systems with service-dominant logic, customers play the role of active co-creators of value, achieving value-in-use in order to enhance user experience in the sense that both parties of the transaction - the customer and the provider are accountable for attaining value-in-use. This means that the provider does not “satisfy” customer needs in terms of the classical understanding of goods-dominant logic but proposes additional unrealized values or the “store” of potential value. On the customer’s side, this values-in-use are realized through co-creation, which brings him extra benefits [8, 83]. This means that value-in-use and user experience concepts take customers into account as active participants of value realization according to the evaluation of their own performance and satisfaction. In this sense, the customer’s own resources are used in order to achieve the initial goal, get desired benefits, and realize value-inuse. For this reason, in order to achieve the increase of revenue by adding additional services to products, companies, as well as researchers, should also consider behavioral mechanisms of customer consumption processes, satisfaction from user experience, and value co-creation [8, 83, 84].

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3 Servitization and Value Co-creation 3.1 From Supply Chain to Value Ecology The traditional focus of the supply chain is set on flows within and around the organization, which show the necessary steps a product has to take in order to minimize costs and inventory turnover rate [85, 86]. The concept itself is focused on distribution and costs, which are held at the minimum possible level at each step of the chain, rather than on the value be added. The value chain approach has been applied in non-digital industries such as retail, automobiles, fast food, grocery, I.T., etc. [3, 87] have addressed a number of limitations in regard to the concept of the supply chain on interactive software and other creative industries. These limitations include the fact that the concept of supply chain considers business processes as static, stagebased, and linear; do not take into account possible competitive character of the value chain; do not cover influence on the environment; considers value as embedded to a product; ignores customer-to-customer relationships [3]. To overcome these limitations, a number of other concepts have been suggested: value circuit [88], value chaining [89], value shop and value network, etc. [3] use an ecosystem metaphor to describe businesses where supply chains, networks, and value chains merge and interflow. The concept of value ecologies has shown itself to be more suitable for describing business models, where value creation and co-creation play a key role in revenue generation. In this sense, value ecologies focus more on the effects of developments and changes that modern business models take on to increase competitiveness in the market. They suggest a more dynamic approach to the analysis of products and services, emphasizing the generation of value rather than the product or service itself. They also take into consideration both competitive and cooperative processes, which are closely connected with the idea of the environment of factors and emphasize the idea of networks or webs of relationships [3]. Value ecology shifts provider-consumer relationships from a concept where value is generated within companies and offered to customers to the creation of environments where the customer and provider of products or services co-operate in tandem with communities of consumers to maximize revenue through maximization of added value. In creative industries such as the game industry, this shift is strongly influenced by the process of servitization. In value ecologies, value creation is not a one-way process but a relationship involving reiteration and feedback, which key elements are compared in Table 1. Organizations and customers combine their resources, knowledge, and experience with all participants of the value-creating ecosystem, which leads to value co-creation [90]. In this sense, companies must face the challenge of transformation from traditional corporate logic, where value is generated by the company, into consumercentric logic, which requires more openness, interactivity, individuality, and customer influence [91]. Customers’ influence on value creation means that customers integrated into the system of value creation and at multiple points of exchange are involved in competition with the company in value co-creation, can influence when

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Table 1 Comparing key elements for supply chain and value-creating ecologies [145] Element

Supply chain

Value ecology

Customers

Consumers outside of the system

Consumers, suppliers, and competitors integrated into the system

Environment

Static/stable

Chaotic/uncertain

Focus

Supply-side OR demand side, not both

Supply and demand sides

Value creation

Limited emphasis on value creation

Value creation throughout the ecosystem, competition of customers and the company in value co-creation

Relationship type

Vertical

Both: vertical and horizontal

Knowledge leverage

Within the enterprise

Across the ecosystem

Resource approach

Defending

Sharing

Time orientation

Short term

Long term

and how value is co-created, and must be considered an imprescriptible part of the environment. The transformation of traditional corporate logic from supply chain to value ecologies in creative industries influences the way companies are managing to reflect on provider-consumer relationships and how value creation works in business. Product or service providers shift their way of thinking from company level to value system thinking, from product value to network value, from consumers to co-creators of value, and from co-operation or competition to complex co-opetition [91]. This shift in thinking has already been applied among game developers. A case study on “Trainz”, provided by [92], shows the example of content co-creation in a train simulation game released by Auran [93], who released a game itself and a platform, which could be downloaded from a website and enhanced user experience in a way that customers could create and distribute additional content. Such an approach made it possible to outsource a part of value creation to customers and build up a fan base or “developer” community in order to involve players in value co-creation, sharing of ideas and know-how, and development of concept arts and content. The company acquired game innovation at a low cost, and users received a product they wanted. This enhanced the value of the game and, as a result, formed a customer base, which led to higher longevity of the product and to an increase in revenue. In this example, the customer’s role has been shifted from that of the passive, isolated consumer to an active and connected co-creator of value. Auran [93] does not act as an autonomous provider but offers more than just a product. It offers a co-creation experience for customers, which becomes a basis for additional value. The importance of network formation instead of chain creation is also connected with the benefits of information flows. Networks in their nature provide more

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horizontal connections, which allow rapid information transfer as customers are connected to the provider and interconnected with each other within a network. This principle supports creating new information as each person receives information and can build new ideas upon the information received. Value creation is based on the manipulation of the information accessible in networks, which underlines the operation of value ecologies [3] and brings additional economic benefits to companies. The traditional top-down approach to product development is replaced with a bottom-up approach. Another benefit of Value Ecologies for companies lies in market externalities. The value of a product increases with the size of its user network or with the ability of a product to connect customers with each other. When connection within a value ecology occurs, a snowball effect can be observed, making it more difficult for customers to change the network due to the high social cost of disconnection [94]. In service systems, the snowball effect and social aspect of a network increase not only the value of a product but also the value of services and the value of co-creation. Value co-creation in value ecologies has not only a cooperative but a competitive character. Brandenburger and Nalebuff [94] termed this “co-opetition”, which reflects the competitive activity within networks needed for network evolvement. They suggest the following classification of network players: customers, suppliers, competitors, and complementors. This classification was extended by [95] with four types of relationships within a network: coexistence, co-operation, competition, and co-opetition. Co-opetition is the basis of the “coevolution” of products and services in service systems, increasing customer satisfaction and longevity of a system. In the game industry, coevolution and customer involvement in value co-creation have shown the necessity of product-service bundling in order to engage co-opetition and increase a succession of offered products/services to customers. In this sense, a web of products is offered to the customer, increasing the interest of players involved in the network and allowing businesses to offer and sell more. This makes companies focus on the whole value of the ecosystem instead of employing the traditional consideration of product value. To engage the customers in the value co-creation, it is important to build a healthy ecosystem as the health of the ecosystem determines the satisfaction of each individual [17] and, as a result, the success or failure of a product or service in a network it belongs to [18]. From this perspective, even if a product or service system is successful on the market, the continuous success of a product and its services, which are obtained in a system, is highly dependent on the health of the ecosystem. For the game industry, this means that the readiness of consumers to accept additional services offered in a game depends on the value ecology created around a specific product. Therefore, even if a specific product or service is successful, the continuous success of the whole bundle is highly dependent on the ongoing state of its ecosystem. In that sense, companies are more likely to receive a financial benefit from the ecosystem regardless of the failures of specific elements within it because in contradistinction to supply chain in the environment of an ecosystem, supply can

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easily be rerouted, and a failure in an individual creative element of the network is recoverable. Sawhney and Prandelli [96] compare business ecosystems with organic systems and conclude that this similarity allows turbulent businesses, such as those in creative industries, to operate within complex contexts with a high degree of flexibility through their ability to create and adapt to “chaotic” situations. There are three main processes embedded in the core of business ecosystems: the self-referencing process, which maintains the stability and continuity of a system; the self-transforming process, which brings variety; and the self-organizing process, which helps a system to adapt to its novelty [97]. All three processes underline the idea of continuous consumption of additional products and services in the system and its ability to adapt. They also show a value-creating ecology as a constantly evolving and growing system containing several connections that can be considered as hubs of creative business activities. At the same time, the element of the “fitness” of an ecosystem as a whole should also be taken into consideration [3].

3.2 Value Creation and Co-creation in Value-creating Ecologies For further analysis, it is necessary to understand how value is created in valuecreating ecologies and how customers and companies are involved in the process of value creation and value co-creation. In the scientific literature, there are different views on value creation [31, 63, 98, 99], but all of them agree that value is to be considered mainly as value-in-use. In other words, the service provider generates the value of service in the process of development, and the customer always co-creates value in the process of obtaining a benefit. In this sense, the provider and the customer are always value co-creators in the moment they take specific actions to fulfill a service or benefit from it, even when these actions are not clearly defined. Grönroos and Gummerus [100] offer a Service Logic approach according to which value creation is a customer-driven process, especially referring to the value-in-use concept. Value can be created in direct or indirect interactions and determined by the consumer during the physical, virtual, mental, or possessive experience of the user [99]. A deeper look at this concept shows that service providers, in reality, do not create any value but only potential value-in-use for customers, where customers generate the value of service during the process of consumption. Following this logic, three main spheres of value creation can be determined: (1)

The provider sphere

In this sphere, the service provider generates potential outputs of a service. These outputs are available to the customer only after the fulfillment of service from the

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side of the provider, which generates potential value-in-use and determines the value that a customer can generate during the process of service consumption. (2)

The joint sphere

This sphere represents collaborative value co-creation where the service provider directly or indirectly sets free companies’ resources and makes them accessible for customers’ interaction in any form in order to establish a collaborative merged process of value co-creation. (3)

The customer sphere

This sphere is closed to the service provider. The customer creates value by interacting with provided resources, applying his or her own processes individually or in a community of customers [98–100]. Sorensen and Drennan [101] validate social media-based organization-supporters as value co-creators as well. From this perspective, customers, who affirm valuein-use of specific products or services, can be considered value co-creators. This affirmation takes place in both the interaction of customers with the provider and in interactions between customers and potential customers (posts on social media and comments on companies’ posts). In this sense, social media communities play the role of an ecosystem, as discussed in the previous section. In the game industry, instruments of customer interaction are often integrated into the product (chats, emojis, emoticons), etc.). In analogy with social media-based communities, value co-creation cannot only take place during the process of service consumption but also during interactions between customers within the ecosystem. Sorensen and Drennan [101] refer to this type of value co-creation as an altruistic type because customers do not obtain a direct benefit from such interactions. This type of value co-creation can (however) bring additional social benefits to the customer, though this is not a research topic of this paper. The organization of value-creating ecosystems not only brings additional benefits to customers but also to companies. Building a healthy environment for customer interaction and stimulating these customers for altruistic value co-creation offers lowcost access to the understanding of service consumption and value creation processes. This gives providers more opportunities to set and achieve goals, find better ways to satisfy customer needs, and support ecology and the process of servitization. According to the research of practices [102], in business ecosystems, parties perform different actions that are dynamic and evolving and which lead to value creation through the usage of company resources (equipment or infrastructure) [103]. These practices contain three main elements: procedures (instructions or rules); understandings (knowledge and tactics); and engagements (emotionally charged commitments), which can be observed in many gaming communities. Other studies divide practices into two groups based on the assumption that consumption of a service is not a compulsory element of a value-in-use creation [104–106]. In other words, practices can be productive and consumptive. Productive practices represent the creation of value through active usage or consumption

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of service, whereas consumptive practices address customers or potential customers who play the role of recipients of other customers’ practices. Consumptive practices are also divided into direct, where parties directly interact with each other (recommendation, advice, etc.), and indirect, where customers observe each other’s practices (reading comments, observation of usage, etc.). This classification is relevant for this research because, in video games, a value can be invisibly co-created through customers’ interactions (also indirect). This research and these classifications offer a better understanding of value creation through interaction between customers and companies and interactions between customers, which enhance understanding of value co-creation. It gives a better overview of how customers employ practices of value creation. However, there is still a lack of studies that show how this employment functions in the unique context of gaming communities. Traditionally, games were focused more on direct rather than indirect practices. Digitalization and the development of communication channels made it possible to combine direct and indirect practices within an ecosystem. Customers had to fulfill their needs by performing indirect practices via developers’ forums or online retail platforms (for example, Steam). The development of ecosystems around specific games has made it possible to co-create value in services directly in-use (through the interaction between service providers and customers) and indirectly through interaction with other users. The indirect practice also includes addressing other customers through the visibility of obtained service. In the process of value creation, game developers often use practices of direct interaction (also through the game platform) in order to share news, information about upcoming changes, schedule of server maintenance, sales, etc., and indirect practices where players communicate and share user experiences. Servitization of the game industry and the bundling of products with services show that, when using this business strategy, it is important to leverage the social component of games in order to increase customer willingness to consume games not only as a product but also as services, which can be obtained in a virtual environment. Stimulating customers to use direct and indirect practices to increase value co-creation boosts the value of a bundle both for users who actively co-create value through the value-in-use principle and for those who can “observe” additional value through or without direct interaction with others. In other words, to maximize revenue, organizations’ strategic planning should be focused not only on creating potential valuein-use but also on ways that add value and spread it even among those who do not actively use additional services but only observe others doing so. In this sense, game developers should not only build strong relationships and support communication between the company and its customers but also build stronger ties among supporters. This leads companies away from focusing on supply chains’ organization towards building value-creating ecologies and from prioritizing product value to prioritizing network value instead.

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3.3 Value and Value Co-creation in the Game Industry In the previous section, attention was given to the shift from an organizing principle focused on product value to a principle focused on network value. The value of a game as a product-service bundle binds together different systematic parts [107]. Considering business structure as a value creation ecology makes it necessary to talk about the understanding of value, not from the perspective of the single component of an ecosystem, but as a merged output of multiple practices on multiple levels, involving a large scale of actors [108, 109]. In the game industry, a core component of generating value on the customer side is the value-in-use experience, which is an individual phenomenon. At the same time, indirect practices rely more on the collective character of value co-creation. In this sense, the value of games as product-service ecosystems has emerged and is characterized by both of these phenomena [110, 111]. From this perspective, it is important to study value created in video games as value created ecologies, referring to the customer from whom it emerges and to the ecosystem as a whole. The individual level of value co-creation cannot be isolated from the collective level because value generated on the micro-level is incorporated with the macro-level [110]. In the game industry, this interconnection stimulates customers to co-create value with the value-in-use principle because, in a value ecosystem, both active direct practices and altruistic practices are merged. For servitization of the game industry, this means that customers are more likely to consume services and to co-create value if consumption of service can increase value for others as well, in other words - if value co-creation can be observed. Figure 4 (adapted from [110, 111]) shows how value is generated among actors of value-creating ecologies.

Fig. 4 Value co-creation in value-creating ecologies [109]

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Understanding the synergetic character of value in value ecosystems can help game developers offer services or product-service bundles, not only from the perspective of potential value-in-use but also from the perspective of collective value within an ecosystem, even when a service is consumed by one individual and not collectively. On the stage of service development, a question should be answered: “How can this service co-create value for those who do not consume it?” The value created on specific levels of an ecosystem is generated in a specific context and shared with other individuals in their own contexts, meaning that value is added in mutual contexts [112]. Meynhardt [113, 114] asserts that value “is situated” only in a social environment and lies beyond the economic transaction, meaning that companies can influence service experience through psychological processes [115] and, as a result, appraisal of a service system. In games with a strong social component, the engagement of individuals in value co-creation influences the whole value co-creation system. The subjectivist view on value creation affirms that value is not a characteristic of an object (of a product-service bundle). It claims that value is not “physically” attached to a product but identified, realized, and created by individuals through consumption. Thus, co-creation of value is not an option [32]. In games with an implemented social component where consumers operate in a network, once an individual consumes a service and co-creates value-in-use, co-creation of value for other individuals within the network is not optional anymore. For game designers, this means that servitization shifts its approach from product design to experience-centric service design and a service delivery system focused on value co-creation and relationships within the network [63]. In service ecologies, interactions take place on multiple levels and often without the involvement of the company. Customer-to-customer interactions and service experiences cannot be fully controlled [116]. Developers do not offer services in the usual sense but allocate prerequisites, and customers, on their side, get the desired experience and spread it further through indirect altruistic practices. Prahalad and Ramaswamy [117] offered the DART model to analyze and manage value co-creation processes. The DART model includes four blocks that represent different aspects of value co-creation: D-dialogue, A-access; R-risk assessment; and T-transparency. Dialogue. Dialogue represents an interactive dialogue between both sides – the company and the customer, who act as equal problem solvers and co-creators of solutions. In the case of games, a dialogue is established between developers and customers by granting access to information about services through a platform where the company and the customer “meet” in order to agree on outcomes and conditions. Dialogue also helps to establish loyal relationships with the customer [117]. Access. Access relates to the ways in which the customer can obtain tools, information, and knowledge in order to collaboratively co-create value. Game developers usually grant access with in-game methods and with a platform. Risk assessment. This aspect of value co-creation includes information about potential risks and possible harm, which specific services can incur. In the game community, this aspect most often lies with customers within a network. Information

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about “risks” is usually shared through reviews, ranking, comments, screenshots, videos, and user profiles. Transparency. Transparency relates to the level of openness between the company and the customer and is required to proceed with collaborative value co-creation. Players usually get access to a platform and services within a service platform, and they are also free to leave feedback and express their opinions, which other customers can see. Payne et al. [118] offers a process-based co-creation model, which includes the customer’s value-creating processes and the supplier’s value-creating processes. A customer’s value-creating processes are processes where the customer takes certain actions in order to achieve a goal. Co-creation of value takes place during these activities. The supplier’s value-creating processes refer to an understanding of the customer’s value-creating processes at its first step. This understanding then leads to the establishment of means and ways to offer opportunities for value co-creation. The process-based co-creation model illustrates relationships between provider and customer and extends the DART model in order to give a more complex view on value co-creation. At the same time, all these approaches do not illustrate customerto-customer relations, which are crucial to understanding value-creating ecologies. For the analysis of products in further sections, this element will be added.

3.4 Customer-to-Customer Value Co-Creation in the Game Industry Gaming as a type of activity is often connected with social interactions and experiences shared with other players. Customer-to-customer value co-creation practices, in many cases, define the value outcome formed when gamers co-create with one another the gaming (user) experience. Accordingly, investigation of customer-tocustomer value co-creation is needed to improve understanding of user experience [117] and value outcome for gamers. The social experience in gaming influences user experience of games and experience of services, which payers often realize through social interactions. Customers participate in different in-game events and activities, take part in indirect competitions (leaderboards, ranks, etc.), discuss products and services and share different types of specific information. With these interactions, players build social relationships, use and enhance social skills, and as a result, co-create the value of products and services. In that sense, the social context of gaming makes the user experience similar to that of tourism, which also takes place in a social context where people take part in guided tours and events and meet other tourists [60, 118–120]. Many marketing studies conceptualize value co-creation as a part of provider-consumer interaction [121–124], forgetting to take customer-to-customer interactions into consideration. For that reason, it is important to acknowledge customers as actors who co-create

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value for each other through a social context, which plays an important role in creative industries. Following this logic, the positioning of games as services cannot be dominated by an outcome-oriented perspective where the value of a service is defined only by the benefits or additional features that consumers can obtain. This logic focuses on how game designers can create and deliver valuable experience and show this value through customer perception. However, it does not take into consideration the fact that customers can co-create the value of a product or service for other customers even without the active participation of the provider. Traditionally “value” was studied as a customer’s evaluation of outcome and the benefits one could receive in exchange for the sacrifice made [125]. This approach was adopted by other researchers and extended with other concepts such as “value for the customer” [126] or “customer-perceived value” [127], which focused on customer’s perception of value according to offered benefits and expectations. This approach focuses on customers’ judgments, evaluations, and perceptions of value in order to predict consumption choices customers will make. In their study, [48] focus more on the emotional side of choices and value perception rather than on the logical aspect of evaluation. This approach considers a “value” as an imprescriptible attribute of a product or a service, which is “glued” to it at the stage of conceptualization and development. Even if a value is obtained only through the usage of a product or consumption of a service, its potential is still embedded in it before it is consumed. This means that customers are eager to obtain a specific type of value-outcome according to their expectations and experience [128]. These expectations are studied in order to make a decision such that a suitable solution can be designed and a service delivering desired experiences can be offered [129]. This approach focuses on two main categories of service delivery: the subject and the object of consumption [130]. Here, the subject is a customer who evaluates the object according to his or her expectations and experience, and the object is a product or a service designed to meet the subject’s expectations. In this concept, customers take on the passive role of recipients of “value” created for them by developers. In the context of social behavior, game consumers can be considered “dynamic social actors”. Through the consumption of products and services, they aim to “interpret their experience and to create new meaning and reality through their actions” [131]. In this way, A gamer’s consumption and realization of services create new meaning and realities for other consumers around them, and this leads companies away from a producer-recipient logic. From this perspective, value is not an attribute of service and cannot be exchanged on the market to deliver desired benefits [31]. The market cannot offer a benefit for the customer but only co-create it with a customer in joint activity through the company and customer interaction [118]. The value of a service is not a static element but is dynamic and situational. This means that it emerges only at the moment when a customer uses it [32]. In this sense, all actors of value co-creation can be considered resource integrators [31]. Consumers, as well as providers of services, allocate their tangible and intangible resources, which are inter-integrated, in order to achieve a

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common goal and to co-create value. Just as the consumer of a service inter-integrates resources with the provider, customers can allocate their own resources for the cocreation of value, which in the context of group consumption leads to co-operation, co-opetition, common participation, and identification with a group of users [132]. In the context of videogames, all this not only leads to an individual increase of value in consumed services but also to the increase of shared value for the community. Gamers who take on an active co-creation role are more “visible” and seen as more sociable and cooperative. Such gamers actively contribute to others’ service experience and, as a result, are more likely to enjoy their own service experience [133]. Gamers who can be considered as active value co-creators can also be a source of in-game innovations (see the above-mentioned example “Trainz”) [134]. Not only can a company or developer adjust their offer according to information received, but other consumers can also get the additional information and “learn” ways to enhance their own user experience within a service. In this sense, the role of the consumer shifts in the direction of provider and developer [135] Co-creation of value and additional value generated by customers is not always the result of a service-related or company-related value creation [136]. Gaming communities often move between games, still staying in one group in order to get user experience as a group. This means that they traverse the borders of a specific game and develop into a multi-product community, co-creating value outside of a specific service context in their own social context [15, 137]. Service-related value co-creation evolves into value outside of the specific service and stays with customers afterward. In interaction-rich industries such as creative industries and in particular games, it is important to understand what customers “do” with services [148] in order to set up economic goals. The analysis of services and servitization using a customercentric focus instead of a provider-oriented approach offers a “holistic understanding of customers” [15] and will lead to a better understanding of their lives and practices and how services can be naturally integrated into their everyday lives. The social sphere of games as product-service bundles plays an important role in the willingness of customers to use additional services. The understanding of the customer’s social sphere within a game community will help developers support and manage customer co-creation processes, including customer-to-customer value co-creation. Value resides in the consumption experience [138], and only users themselves can make sense of their own subjective experiences and value outcome even if these experiences are influenced by other users and the community. Rihova et al.’s [132] research draws parallels between the social flow theory and value co-creation. Customers’ personal skills are used to overcome challenges in order to achieve positive psychological outcomes. In this sense, gamers are able to integrate their skills, receive a challenge and overcome it in a service setting. This often involves a social aspect and requires customer-to-customer interaction. As a result, customers achieve a positive emotional state, which brings some tangible or psychological benefit and betters the customer’s well-being [32]. Rihova et al. [132] underline that despite similarities found between these two theories, too much focus on them could lead researchers to focus on inputs and outputs, which can lead to over-simplifications of value co-creation understanding.

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Customer-to-customer value co-creation in games requires a more holistic approach as the subjective perception of experience, and mental processes do not answer the question of what customers “do” with services [14]. A practice-based approach, discussed in previous sections of this paper, provides a better basis for further research of inter-connected and inter-integrated customer-to-customer value co-creation in the game industry, as it gives a better overview of routine social practices embedded with value [102, 139–142]. Gaming, as a type of activity, is often connected with social interactions that involve a shared or collective experience. What consumers consider value depends on individual perception [107]. At the same time, the value of a service, which is subjective, is something that is created by social actors [143] and understood on a subjective level [107]. In games, we deal with social structures where individuals play their role in value co-creation (personal needs and expectations), but social forces are still dominant. To take the social and individual character of value co-creation in games into consideration, the notion of social practices will be used [102]. Social practices cannot simply be considered actions one takes. Practices have more characteristics and contexts in which individuals show specific behavior [102]. The notion of practices makes it possible to consider gamers as both objects and subjects of consumption at the same time. Contexts of consumption and value co-creation (mental state, tolls/skills, space) can also be considered in combination [143]. Users co-create value for themselves and for others by using their skills and know-how, acting individually or in social groups, using different platforms as tools, and performing practices. Understanding customer-to-customer value co-creation principles can help organizations support engagement and value co-creation by individuals, thus enhancing the value “outcome” for all actors in the ecosystem through planned positive interventions. This goal can be reached with the stimulation of existing practices and the reduction of those that are not attractive to the company or actors of the ecosystem. Instead of trying to predict customer experiences, developers can enhance (the position of) their customers to active value co-creators and distributors of additional value through indirect consumptive practices. This paper focuses on the understanding of the multidimensional and dynamic character of customer-to-customer value co-creation and its influence on the willingness of customers to use in-game services and accept servitization as a distribution and pricing model. For this reason, it is important to understand the social context of games. Gamers co-create value not only for themselves (but also for others) and not only through the consumption of products and services (but also through collective use). This leads us to the enhancement of the “value-in-” concept to “value-in-socialpractice” [140], which underlines the importance of customer-to-customer value co-creation and replaces the feature-benefits value approach with one more suitable for value-creating ecologies. In games as ecosystems, there are different ways to perform practices and to cocreate individual and collective value. For the purpose of this paper, it is important

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to determine the degree to which social practices are performed, depending on the possibilities and context of a specific game. Gamers use their personal resources (skills, equipment, knowledge) [143], and this is one way of determining how value is co-created through value-in-practice. The social context of games determines whether gamers perform social practices individually or in a group and how they interact with strangers. This interaction can take place in an in-game environment as well as on external resources. The degree of active or passive interaction and value co-creation highly depends on the individual and his or her personality and mood [144]. Customer-to-customer value co-creation in social practices is represented by shared images, social structures, and the consumption contexts in which practices are performed [130]. The context of consumption also influences the individual’s perception of value. If someone has a lack of personal resources (skill) and finds difficulties in overcoming in-game challenges or needs information about a product/service, others who possess more personal resources may help with solving a problem or with information. In such cases, social interactions take place, and value is co-created. In that sense, the role of value-creating ecologies is to support companies’ learning and understanding in ways that help to facilitate customer-to-customer value cocreation processes. The game developer’s role is limited to support and shifts from the provision of benefits to the moderation of co-creation [96, 143]. Based on this, companies could support servitization processes by implementing tools for easier performance of social practices in order to engage players in co-creating value in a service consumption context. In this sense, open ecosystems with different levels of actor interactions (provider-customer, customer-customer, etc.) motivate customers to consume more services in order to experience value-in-social-practice. Enhanced user experience, which is offered to gamers as additional service in a bundle, is more likely to be considered “valuable” by the individual consumer if others can observe its value through indirect consumptive practices.

3.5 Development of Ecosystem and Acceptance of Servitization Based on the literature review, conclusions that processes of servitization, digitization, and value co-creation are deeply connected [31] have been made. For that reason, these processes should be researched as complex multi-level notions, which interconnect and depend on each other. Digitization of the gaming industry has made it possible to offer additional services to customers in order to enhance the user experience. Some products were already successfully bundled into PSSs, and revenues were generated from both sales of the product and additional services implemented into the game platform [54].

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The example of the gaming industry revealed many examples of unsuccessful servitization in recent years. Customers were not ready to accept the new productservice model and to consume additional services after purchasing a product. Results of this research show that customer readiness to accept additional services is much higher in products with integrated mechanisms of support in value-creating ecologies. The more developed an ecosystem is and the more possibilities customers have to perform social practices, the more additional services they consume. This results in the increased shift of the percentage of generated revenues towards services. The same processes can be observed in other creative industries, such as the music industry. Some research shows that the popularity of iTunes is also connected with a high level of social interaction within the platform, which offers a complete solution instead of pure (digital) products [43]. Instruments of social activity and interactions are important for customers not only because they help to satisfy their demand for socializing but also because they serve as powerful tools for value co-creation. Customers can co-create value by performing productive and consumptive (direct and indirect) practice, and this can be used as a measuring tool for further research on value co-creation and valuecreating ecologies. Figure 5 (adapted from [17, 18, 43]) shows the dependence of customer acceptance of servitization from the development of the ecosystem. In games with integrated social mechanisms where customers can perform productive practices as well as direct and indirect consumptive practices, customers are more likely to accept the servitization of a product and consume additional services. This principle also applies to products, which are distributed and sold at full price, as well as to products distributed on F2P basis.

Fig. 5 Dependence on customer acceptance of servitization from the development of the ecosystem

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In that sense, the development of value-creating ecologies around specific products can help game developers to support the process of servitization and run it more “smoothly” and less painfully for both the company and the customers. This answers the first research question: The development of value-creating ecologies can be considered the main factor for customer acceptance of servitization in creative industries. This leads us to the next research question of this paper. Considering the characteristics of servitisation as bundling of products with the services, and the offering of complete solutions, services must be designed in a specific way that will increase the value of a product or a bundle for customers. The notion of social practices reveals that there are many ways and directions in which customers can co-create value. In value-creating ecologies, customers cocreate value by performing productive practices (value-in-use) and by performing direct consumptive practices (communicating with each other) as well as indirect consumptive social practices (observation of others’ interaction, observation of services consumed). Within value-creating ecologies, customers want to consume services as well as perform altruistic practices. This means that at the stage of service design, companies must answer the question: How can this service add value for those who do not consume this service? This is relevant for creative industries in the context of servitization because by observing additional value generated by services, customers are more likely to accept servitisation and to consume additional services themselves, resulting in increased revenues. In other words, this answers the second research question of this paper: Regarding servitization, it is important to design services in a way that they can generate additional value even for those customers who do not consume these services. Finally, it is relevant for companies to build and support value-creating ecologies and design services in a way that they can increase value for the whole ecosystem in order to increase customer acceptance of servitisation and to increase revenues.

4 Conclusions The servitisation and digitization have raised the importance of public mechanisms and made this as important as market mechanisms in the game industry. More and more game developers and publishers offer their games not simply as complete products but as long-life experiences that require constant support and development of additional content, and the release of patches, in-game boosts, and in-app purchases such as loot-boxes, skins, emotes, energy and many others. This means that the final product for game developers has shifted from an eProduct to a product-service platform [1]. Thus, we analyze in this paper topics of servitization, value-creating ecologies, and their connection within creative industries. The research showed a theoretical correlation between the development of a value-creating ecology and customer acceptance

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of servitization, and customers’ willingness to consume additional services after purchasing a product. In the end, we came to two main conclusions: (1) (2)

Development of value-creating ecologies can be considered as the main factor for customer acceptance of servitization in creative industries; Regarding servitization in creative industries, it is important to design services in a way that they can generate additional value even for those customers who do not consume these services.

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Sharing Economy Business Models: Informational Services Innovation and Disruption in Uber and Airbnb Lucia Šepeˇlová, Jennifer R. Calhoun, and Michaela Straffhauser-Linzatti

Abstract The driving force behind the increase of the sharing economy is the expansion in technology, in particular, informational services that facilitate individuals, as well as organizations that exchange goods and services, and directly support the expansion of their networking. For the sharing process within the sharing economy, ownership of information and communication technology (ICT) is essential to create an interaction between buyers and sellers. The purpose of this chapter is to investigate the two most known sharing economy platforms, Uber, and Airbnb, with the focus on the technological functioning of their business models. The chapter examines the business models of the Uber and Airbnb platforms based on a review of previous studies. Based on the actual market situation in which companies currently find them selves and the challenges they may face in the future, a SWOT analysis will be provided. Advancement of technologies, especially the Internet, cloud computing, smart phones, business intelligence, and geolocation have significantly influenced the enhancement of the sharing economy and trigger a novelty of their business models. Contributors of the sharing economy, mostly the technological revolution have caused the disruption of traditional business models, in the way the platforms create a demand-supply relationship with customers, derive revenues, as well as the functionality of the platforms in providing services.

L. Šepeˇlová (B) Comenius University, Odbojárov 10, 831 04 Bratislava, Slovakia e-mail: [email protected] J. R. Calhoun E. Craig Wall Sr. College of Business Administration, Coastal Carolina University, Conway, USA e-mail: [email protected] M. Straffhauser-Linzatti University of Vienna, Oskar Morgenstern Platz 1, 1090 Vienna, Austria e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_18

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1 Introduction 1.1 Relevance A concept of sharing as itself has been well-known among mankind for centuries. However, a significant growth of sharing economy took place between 2008 and 2010 following the global financial crisis, which encouraged the population to save their expenses by monetizing their skills and insufficiently used resources and due to the dramatic increase in the standard of living of civilization [1]. Other pivotal factors, leading to the growth of the sharing economy are the digital technology revolution and the accessibility of the goods, which are demand-driven and available for sharing. The current change that is taking place in society because of the emerging trend of the sharing economy is changing the behavior of individuals. Consumers, society, and the economy are in the process of rebirth of long-forgotten trade customs [2]. An indispensable part of human lives is the practice of renting things or providing small services for a fee or for free. In the evolving market environment, influenced by the emergence of modern ICT, there is a shift in the values of a younger generation and their desire to discover new, unconventional opportunities. This has resulted in the sharing economy, a phenomenon of the last decade that is supported by the World Wide Web and affords ease of access to the Internet, as well as the development of innovative, sophisticated encryption systems necessary to deliver services or products. Thus, attracting new types of market players. In the sharing economy, not only entrepreneurs, but also ordinary people, households and organizations provide goods and services. The economic model of the sharing economy makes it possible to share resources efficiently within a community. This approach has grown extensively throughout the world, and from ordinary people becoming entrepreneurs. The business models of the sharing economy distinguish three basic components characterized as suppliers, consumers, and platforms, which take on the role of markets [3]. The main principle is the fair sharing of existing resources among the members of the community in a simple and efficient way, which is beneficial for both sides: the owner leases his property, and the customer draws on a varied offer, available quickly and conveniently. The sharing economy is the most significant change in the corporate environment since the evolution of the Internet. In 2011, according to an article published in TIME, the sharing economy was indicated as “one of the 10 ideas that will change the world” [4]. Interest in the sharing economy is undoubtedly on the rise, as evidenced by the increasing number of users, platforms but also positive forecasts. As early as 2014, 44% of Americans were familiar with the concept of sharing economy [5], and research estimates that participation in the sharing economy will reach more than 86 million Americans by 2021 [6].

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1.2 Goals and Objectives Informational systems are regarded as integral to the success of sharing economy platforms. Their impacts are observed in various business activities such as innovative business models, marketing activities and strategies in building customer relationships. The main objective of an analysis is to investigate the role of informational services in influencing the practices of the sharing economy by answering the following questions: • Which factors create the value chain of the selected sharing economy platforms? • Which attributes the current sharing economy platforms face and which they should focus more on to create a competitive advantage? This chapter has the following structure. The term sharing economy will be examined first by reviewing the number of academic papers. Following the investigation of the business models of the greatest players in the ridesharing and room-sharing industry focus on the value chain that gives platforms a competitive advantage through ICT. In addition, the SWOT analysis of these platforms provides an overview of the current market position, points out the differences compared to traditional business models and reveals room for future innovations and improvements towards customer satisfaction. The research method of this chapter consists in the investigation of the websites of selected platforms and the analysis of existing academic articles and statistical researches.

2 Theoretical and Conceptual Background 2.1 Sharing Economy and Theoretical Definitions The existence of a great diversity between activities of the sharing economy as well as the technological and definition ambiguities of the boundaries developed by the participants have caused that a firm definition of the sharing economy approach implying a common application is very vague and leads to several disputes. Moreover, until today, the sharing economy has taken many forms, and the authors have introduced many concepts in a similar meaning related to the concept of sharing economy. Therefore, in search of a suitable definition and for its better understanding, it is necessary to outline and distinguish a few statements related to the concept of sharing economy. The approach of collaborative consumption for the first time appeared in the literature in 1978, in the book by Marcus Felson and Joe L. Spaeth entitled: “Community Routine Activity Consumption: A Routine Activity Approach.” The activities of collaborative consumption are characterized as: “Those events in which one or more

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persons consume economic goods or services in the process of engaging in joint activities with one or more others” [7]. However, Russell Belk stated this interpretation misleading and refused it. He argued that the Felson and Spaeth definition was too general even though focusing on common consumption activities, for instance, drinking beer or speaking on the telephone. According to Belk, the issue of allocation and redistribution of resources was not sufficiently addressed [7]. Belk’s definition of collaborative consumption is “people coordinating the acquisition and distribution of a resource for a fee or other compensation” [8]. This statement includes exchange, swap, and trading activities in which any kind of monetary or non-monetary reward is present. However, this claim excludes company-sharing activities, such as Couch Surfing, which rejects any form of compensation. In his view, most of the commercial platforms that are these days considered as a part of sharing economy should not in fact been included there [7, 8]. In the key publication in the sharing economy sphere “What’s Mine Is Yours” by Rachel Botsman and Roo Rogers, the collaborative consumption refers to “traditional sharing, bartering, lending, trading, renting, gifting, and swapping, redefined through technology and peer communities” [9]. According to Botsman, the collaborative consumption, sharing economy, collaborative economy and peer economy have common ideas but different meanings. At present, consumers are increasingly confronted with the idea of sharing economy that is by Botsman defined as “an economic model based on sharing underutilized assets for monetary or non-monetary benefits” [10]. It follows from the above definitions that the importance of the sharing economy has been constantly evolving over time because of its long-term expansion and involvement of new facilities. Currently, experts work with several terms, which are used synonymously, some examples of interpretations, frequently used between providers are “collaborative consumption, collaborative economy, ondemand economy, peer-to-peer economy, zero-marginal cost economy, and crowdbased capitalism” [11]. However, some authors argue that the concepts of the sharing economy and the collaborative economy are interchangeable [10, 12]. De Grave notes the sharing economy is one part of the collaborative economy, as “distributed production, peer-to-peer finance, and the open source and knowledge movements” [12]. Although there is no single widely accepted definition, the sharing economy fulfills these basic characteristics [13]: • • • •

Platforms are operating through a website or an application Allowing consumer to consumer transactions Temporary provision of access to goods or services Using unused assets.

Table 1 illustrates an overview of sharing economy definitions stated by various scholars:

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Table 1 Definitions of sharing economy (based on [14–20]) Scholar (Source)

Definition

Belk [14]

“Sharing is an alternative to the private ownership that is emphasized in both marketplace exchange and gift giving”

Botsman [15]

“An economic system based on sharing underused assets or services, for free or for a fee, directly from individuals”

Schor [16]

“Sharing economy activities fall into four broad categories: recirculation of goods, increased utilization of durable assets, exchange of services, and sharing of productive assets”

Barnes and Mattson [17]

The use of online market places and social networking technologies to faciliate peer-to-peer sharing of resources (such as space, money, goods, skills and services) between individuals, who may be both suppliers and consumers

Hamari et al. [18]

“An umbrella concept that encompasses several ICT developments and technologies, among others collaborative consumption, which endorses sharing the consumption of goods and services through online platforms”

PwC [19]

“The sharing economy is an economic movement where common technology enable people to get the goods and services, they need from each other, peer to peer, instead of buying from established corporations”

Cambridge dictionary [20]

“An economic system that is based on people sharing possessions and services, either for free or for payment, usually using the Internet to organize this”

3 Business Models of the Sharing Economy The sharing economy supported by technological advancement furthered the growth of new business models. These new platforms excluded traditional markets, decompose sectoral categories, and maximize the use of scarce resources [16]. A business model is defined as, an architecture for the product, service, and information flows, including a description of the various business actors and their roles; a description of the potential benefits for the various business actors; and a description of the sources of revenues [21]. In other words, business models describe how the company is earning financial resources and defines the way a company generates and derives value from services or products. Their importance lies in ensuring the identity of the organization. The structure of business models is based on the three main choices constituting who the actors within the model are, what products and services are being offered, and how the competitive advantage is being built in terms of the value chain that should not be confused with a business strategy or a marketing strategy. For decades businesses have been running on the principle of linear logic, which meant manufacturers distributed products that were subsequently purchased by customers who owned and used these goods as long as they fulfilled their functioning activities. The economic crisis of 2008 resulted in a paradigm shift towards the preference of temporary ownership over actual personal ownership. Compared

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to traditional business models, the sharing economy platforms operate based on network-based business models. The primary importance of the platform is thus to stimulate customer values and experience [22]. Innovation in the sharing of assets and services allows technological evolution that enables digitally authorized trade, where many actions are available solely with the usage of the mobile devices, through ICT platform (marketplace) between individuals acting as providers (entrepreneurs) and consumers (demanders) of goods and services covering many sectors including transport, delivery and logistics, travel and hospitality, home services, dining, food and beverages facilitated through an online marketplace [3]. Sharing economy models involve three categories of relevant constituents: • Platforms (marketplaces, intermediaries, sharing economy company). Peer markets that facilitate, organize, and mediate connection between suppliers and consumers to simplify their mutual transactions. Sharing economy platforms are known as “online platforms that coordinate a group of individuals (or peers) to enable the sharing of an asset or resource, including physical assets or skills. They are platforms where people can share, rent, exchange, or donate goods and services” [23] • Suppliers (providers, micro-entrepreneurs). Individuals or small businesses, delivering goods or services in peer-to-peer transactions that generate supply of goods and services on the platform. • Consumers (demander). Individuals who buy, acquires, or rents goods and services from supplier, dealing with peer-to-peer transactions on online (ICT) platform due to access to less expensive goods and services. A disruption of sharing the economic models, depicted in Fig. 1, lies largely in commercial transactions resulting from the purchase or sale of consumer goods and services through online platforms that play the role of an intermediary channel between the two parties and thus allow for transactions in different ways [25]. As represented in Fig. 2, another innovative feature represents idle capital. The owners can capitalize on their unused assets either financially or in exchange for a different resource and trust building that enables transaction partners to limit counterparty verification and control of responsibility [26]. Moreover, the innovative platforms have caused a profound social impact, altering the structure of traditional business

Fig. 1 Business model of sharing economy [24]

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Fig. 2 Sharing economy framework [28]

models in terms of employee-employer relationships, for instance, by outsourcing a larger number of the workforce [27, 84–86]. Additionally, digital platforms significantly reduce localization constraints, making them a cost-effective and convenient alternative to traditional business services by reducing transaction costs between sellers and buyers. In the digital environment with the development of ICT, changes are taking place in traditional business models and the platforms’ principles are increasingly being applied. The sharing economy is an emerging economic and technological phenomenon that is supported by growing consumer awareness, the spread of sharing web communities as well as social trade [18]. From an economic point of view, a sharing economy can be regarded as a twosided platform. This means a platform business model is based on mediating interactions between two parties – supply and demand and there are ongoing interactions by consumers who have something to offer and those who are interested in it, without the transfer of ownership [29]. Enhancing technologies, especially the Internet, cloud-computing, smart phones, business intelligence, and accurate geolocation have allowed the sharing of economic platforms to become scalable enough to create a critical mass of users. Platforms are developing new services or applications that are associated with changes in business models, both value and supply chains. Moreover, the multifaceted nature of the platform gives scope for various decentralized innovations. Many authors have focused on exploring business models of the Internet-based platforms. The following sub-chapters describe the two most known sharing economy platforms, Uber, and Airbnb, with the focus on the technical functioning of their business models. By analyzing business models of these companies, it is possible

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to obtain a deeper understanding of the way the platforms create a demand-supply relationship with customers, derive revenues and the importance of the information systems that affect the functionality of the platforms in providing services.

4 Uber and Ride Sharing 4.1 Business Model of Uber Ridesharing services have recorded a significant increase over the last period, with more than 600 global providers estimated [30]. An example of one of the most popular ride-sharing providers is Uber, which has seen a significant increase since its inception in 2009. Uber has become a paragon of business models for other platforms. Uber as a ridesharing application meets the following characteristics: a locationbased driving software system, a third-party mobile commerce platform integrating information online, and an economic model that combines sharing information online and offline vehicle sharing [31]. Uber’s global market value is estimated at approximately $72 billion [32]. The company’s purpose is to mediate transportation; therefore, the meaning of the word Uber is often perceived synonymous with providers of taxi services. The interconnection is carried out through mobile applications, between customers who take advantage of the Uber services, and with drivers who play the role of service providers. Thus, requiring complex functionality of applications between passengers and drivers [33]. A simple business model of Uber is shown in Fig. 3. The model shows that Uber applies a different passenger search method compared to traditional taxi providers. Instead of graphic designation such as taxi stops and

Fig. 3 Uber business model

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street stops, Uber platform drivers rely solely on the mobile applications providing connection between drivers and passengers via the Internet and GPS (Global positioning system) technology to monitor the current position of users and the nearest located drivers. The geolocation tracking process depends on [34]: • An identification of mobile device´s position—Uber applications distinguish between iOS and Android systems. • Providing the right direction—for pointing directions, mapping software and API (Application Program Interface) are used. • Integration with mapping software—implementation of Google maps for solving the logistic issues. After a ride-ordering, either SMS or push notifications are sent to a client about all the questions related to the ride. The difference in the service provision occurs in the way of negotiating the payments of the transactions. Traditional taxi drivers have a price list displayed in their cars, and the cost of a ride calculated by the taxi meter. The Uber applications calculate an estimate of total cost per route before the ride and then sends an electronic receipt via e-mail to the customer. The payments for services are an integrating cashless system through either credit or debit cards, ewallet, PayPal’s or coupon code. The customers are also informed about an estimated time of arrival (ETA) at intended destination before their ride [35]. Uber practices are directly affecting providers of the taxi services as both entities operate in the same market and with the same target segments. However, Salmon [36] suggests this competitiveness can have a positive effect in increasing income for traditional taxi drivers. Since historically, taxi drivers had no bargaining power related to their own income, however, emerging competition represents higher wages, not lower earnings. Disruption in the use of traditional taxi services is visible throughout the world. In a survey by The Municipal Transit Agency in San Francisco indicated a significant decline of 65% over a two-year period in the usage of taxi services as displayed in Fig. 4. Moreover, Bergren suggests that the current impact of Uber will continue to persist in decreasing numbers of rides in the taxi industry and impacting wages revealed [37]. The analysis by Oxford Martin School reveals the extension of Uber services resulted in a fifty percent increase in the number of self-employed drivers [38] and about half as many drivers of Uber operate in United States [39]. The localization technology enabling the finding of the closest passenger, estimates 9.3% reduction in the searching time, allowing an increase rate of capacity utilization [39]. Recently, Laurell and Sandström [40] investigated whether Uber sharing economy platform was primarily conceived as technological disruption or institutional disruption. The analysis of more than 6500 posts from various social media sites such as Facebook, Twitter, YouTube, blogs, and forums, analyzed using social media analytics (SMA). The analysis found many Uber users shared their experiences on social networks sites. In terms of technological disruption, 21.6% of users considered Uber’s performance measures related to the value of Uber services (comfort, safety, precision, reliability, price) and those introduced because of Uber, such as related to

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Fig. 4 Downturn in the taxi industry [37]

competitors (mobile applications or integration of other applications and services). Twice as many users, 44.7%, considered Uber as an institutional disruption and that the user-generated contents of social media platforms are transforming markets by supporting or rejecting the efforts of entrants.

4.2 SWOT Analysis of Uber Uber represents the advantage of the first mover, making it a phenomenon of the ride sharing services. The concept of platform is facing positive, as well as negative views being summarized in the SWOT analysis in the Fig. 5. • Strengths. Compared to other providers, one of the key features being recognized is a dynamic pricing strategy. The policy of “higher demand, higher price” considers several elements that lead to a temporary increase in the price of driving and encourages drivers to take orders to manage higher demand. Moreover, the platform applicate lower prices per ride than most taxi providers [41]. Compared to the riders, the operating costs of the platform are remarkably lower due to the lack of vehicle ownership and related costs such as insurance and, in addition, the company does not register drivers as its own employees [23]. The business model records the interaction with the customer through a system of evaluation of the driver, i.e., the scoring system, which increases mutual trust, safety, and satisfaction among riders [42]. In fact, drivers with a score of less than 4.6 face a problem of deactivating their account. In 2014, only around 2–3% of drivers were situated in the deactivation zone. Under this tool, Uber can control the quality of its services [43]. In addition, since its launch, the company has built a strong brand entering new geographical areas [44] operating in 63 countries with adaptive business offerings, such as Uber drive, eat, health, freight [45].

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Fig. 5 SWOT analysis of Uber

• Weaknesses. The business model of Uber is based on the dependency of drivers. Unfortunately for the company, during its decade of existence, Uber has faced several scandals ranging from sexual harassment to aggressive anti-competitive practices that have led to reputational damage [46]. Being late, offensiveness, cancellations etc. are other examples of bad behavior that travelers listed when they evaluated drivers in their online reviews, in addition, they pointed out numerous complaints regarding customer service. These two main contributions give rise to Uber’s value co-destruction [47]. The consequences of unpleasant experiences with Uber led to the #DeleteUber campaign, which went so far that 200,000 users removed the application within a few days [48]. In addition, the company suffered a loss of $5.2 billion in the second quarter of 2019, which was recorded as the largest loss ever [49]. • Opportunities. Current CEO Khosrowshahi sees India, Africa, and the Middle East as emerging markets for the next decade, not only by offering ridesharing, but also by offering other products such as Uber Eats, which faces great rivalry, especially in the Indian region [50]. Although the platform entered the Chinese market in 2014, Uber eventually sold its shares to the Chinese competitor Didi. Frankly, the platform was not ready to enter such an aggressive market and failed, mainly due to regulations favored by local retailers in the region [51]. Increasing the number of vehicles on the road would not only allow the company to grow but would also reduce the estimated time of arrival (ETA) and provide an opportunity to offer more fares [52].

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• Threats. In 2016, the company faced a massive privacy data breach of 57 million users and 600,000 drivers by hacking a cloud service [53]. This privacy attack cost Uber $100,000, which was paid to the hackers for restoring the stolen data [54]. Once Uber expanded geographically and with its market shares, it became known to local authorities, which began to address the legality and ethics of the company. Due to vehicles and driving safety issues and a lack of corporate responsibility [55], in some European countries, such as France, Germany, Italy, Spain, Belgium, and the Netherlands [56] Uber rides have been banned because of “unfair trade services” or “illegal taxi service” [57]. As in any business, there is also a danger of substitutes, such as self-driving cars and competitors, for instance, Lyft, Didi, Bolt, Yandex. Although Uber still ranks first place in the ride-hailing industry, if its opponents geographically expand and extend their product diversity, it could lead to the elimination of Uber rides in the future [58].

5 Airbnb and Room Sharing 5.1 Business Model of Airbnb Since 2008, Airbnb has provided a two-sided online lodging platform option for hosts to monetize their unused (free) space, and for guests, an option of choice from numerous offers of short-term rentals, with lower costs [33]. In 2019, an estimated enterprise value of Airbnb was around $35 billion [32]. Since its inception, the company has recorded 7 million units, encompassing 100,000 cities in 220 countries and with over 150 million users worldwide [59]. A simple business model of Airbnb platform is shown in the Fig. 6. Innovation of the Airbnb business model protects the identity of users by ensuring authentic personal information and providing photographs and links to their social

Fig. 6 Business model of Airbnb

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accounts. Airbnb, just like Uber, is only a marketplace for connecting providers and users of accommodation assets, but none of these platforms own any items [60]. Once platform users confirm their order, hosts receive confirmation messages. Customer payments are usually made through PayPal, direct deposit, or international money wire. Revenue for the platform provider is derived from both actors: guests and hosts. Guests pay between 9 and 12%, depending on the duration of their visit and the hosts receive three percent for covering processing fees. To increase reservations and sales, a free photographic service for attracting new guests is offered. Ert suggested photos that are viewed as more trustworthy by guests charge higher prices than their counterparts, who are perceived as less trustworthy [61]. As in the case of Uber, Airbnb places a significant emphasis on the rating system, otherwise called the “five-star review”. A mutual peer review is given by hosts and customers about their overall satisfaction and experiences. In the sharing economy, rating systems are a key tool for building trust between parties and encouraging future participation [62]. Research from University of Zadar [63] explored the content and presentation of information and communication, as well as simplicity and accessibility of data from Airbnb platform. The results showed that interest in the home sharing services is growing dramatically, especially amongst younger people. The platform provides simple handling, integrity of payments, functionality of the service itself, and the use of ICT in bookings. Users who are familiar with ICT did not have a high level of dissatisfaction due to lack of communication with the provider that may sometimes occur, for instance, when host´s cancellation occurs. With ICT, users can easily and quickly find an alternative solution. The Airbnb business model is considered complementary to the model of the hotel industry and geared towards generating economic benefits for local cities provided by Airbnb customers. Airbnb has significantly affected the hotel industry through a strong network and growth of both users and service providers. Table 2 represents numbers of available rooms offered by Airbnb compared to the ten largest hotel chains as reported by Hotel News Now [64]. In 2014, Airbnb began strongly competing with the larger hotel chains by offering comparable accommodations at lower prices, targeting the business segment. By 2015, this segment represented 10% of Airbnb customers. This had prompted cooperation between smaller and luxury providers of hotel services that currently post their offerings on the Airbnb’s platform [65]. Table 2 The largest accommodation providers (based on [64])

Provider

Existing hotels Number of the rooms

Airbnb

1,000,000

InterContinental Hotel 4840 Groups

710,295

Hilton

4278

708,268

Marriott

4044

692,801

Wyndham Hotel Group

7645

660,826

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Today, Airbnb and Uber are the most frequently explored platforms for the disruption of traditional industries. Both companies successfully demonstrate that the use of unused resources can be organized globally. Their revenues reached an estimated $1 billion in less than a decade, without the company owning one single room or vehicle [22].

5.2 SWOT Analysis of Airbnb Since its launch, the platform has become an integral player in the sector of tourism and offers authentic accommodation in local residences [66]. An overview of Airbnb’s strengths, weaknesses, opportunities, and threats can be found in Fig. 7. • Strengths. The idea of an overnight stay in the lodging of a stranger would be impossible without mutual trust between the participants. Therefore, the platform created a reputation system for sharing and evaluating experiences of users and hosts, as well as for creating profiles to get to know each other better. As shown by Airbnb research in collaboration with Stanford University, non-feedback hosts tend to receive four times fewer booking requests compared to a host with at least one review, whilst the accommodation with ten feedbacks is ten times more likely to be booked [67]. A survey by financial services company Morgan Stanley of 4000 Airbnb users found that more than half of respondents chose Airbnb because

Fig. 7 SWOT analysis of Airbnb

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of the lower price, and almost one-third were looking for an authentic travel experience, such as learning about local culture and tradition accommodation while staying close to locals [68]. In addition, the platform encourages existing users with a referral program for each new user they recommend services of Airbnb by providing financial compensation to both parties [69]. • Weaknesses. Research by Sthapit and Björk focused on negative reviews on Airbnb, of which almost 90% of feedback indicated poor customer service and dissatisfaction with the length of platform responses, lack of support in resolving issues, and a reluctance to return money [70]. In addition, research has shown negative experiences with hostile behavior, such as disrespect, last-minute cancellations, and misleading accommodation standards that lead to distrust of the Airbnb platform, which depends on host interaction. Moreover, there has been recorded numerous safety and privacy concerns among Airbnb users [68]. The business model of the platform is based on host dependency. Thus, if a host provides poor quality services to its customers, it damages not only the reputation of itself, which in turn leads to distrust of host, but also to the platform [71]. • Opportunities. The platform noticed a sharp increase in the number of travelers’ interests in 2018, namely a 131% increase in the number of guests in China and 65% in India compared to the previous year. There are currently more than a million listings in Asia-Pacific region. The goal of room-sharing provider is to bring one billion users to platform over the next 10 years. Therefore, by 2030, Airbnb plans to expand at least 40% of its business activities into emerging Asian markets such as China and India [72]. The platform would be able to gain a competitive advantage by expanding its current product portfolio, which would differentiate it from the competition, for example by partnering with travel agencies and offering a comprehensive travel package, insurance, car rental, etc. • Threats. Many of the rents under the auspices of Airbnb are illegal, but the company is not legitimately responsible for complying with local laws by its hosts. In fact, tenants should rely on Terms of Service and local regulations [73]. Moreover, when renting with Airbnb, travelers avoid paying taxes, which are charged in traditional accommodation facilities, e.g., accommodation taxes [74]. Nevertheless, the governments around the world are seeking a tool to regulate short-term rentals (STR), for instance, France prohibited in some cities a whole residence STR without special permits for the period longer than 120 nights in one calendar year [75], San Francisco [76] and New York City [77] banned whole residence STR that are not licensed for more than 30 days. In addition, several lawsuits have been reported against Airbnb, such as racial discrimination, with an African American man claiming that his application was repeatedly denied by accommodation providers [78], or discrimination in Israeli areas [79]. As in every industry, there is also a threat of current market players operating in the industry such as Booking.com, HomesToGo, Vrbo and Flip Key [80].

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6 Conclusion 6.1 Synopsis Sharing economy is not a new business model but has expanded due to informational technology. As demonstrated in the study, innovative technologies have significantly disrupted business models of platforms, making the way of sharing in the global dimension much easier than ever before. The innovativeness in the new ways of transmission of sharing capital and services involves the integration of ICT-platform as mediator in the sharing relations. A considerable disruption, compared to traditional brick and mortar intermediaries, lies in the fact that platforms are not the owners of sharing items. Further, the technology incorporated into business models made it possible to liquidate transaction costs to the minimum level that are normally associated by doing businesses and in the case of micro-enterprises, transaction costs would absorb a large part of the profit from the business. Significant cost reductions in transaction costs such as costs of switching, searching, and negotiating have been associated with the sharing economy for both providers and users. Without ICT—based sharing platforms, these costs would be too high and the development of the sharing economy in the commercial markets would be very difficult. Cost reduction in the electronic commerce represents a considerable advantage in the removal of certain entry barriers for new providers entering the market of the sharing economy [81]. Moreover, the platforms face negative advertisements due to numerous legal inconsistencies. Continuous improvement within legal constraints and cooperation with governments would be beneficial in adopting sharing rules in cities and countries around the world [82]. Due to dependency on ‘partners’ (service providers), if a partner provides poor quality services or behaves inappropriately, customers tend to show resentment towards the platform. It was found that trust in the service provider is directly proportional to the trust in the platform, without trust the platform would not be able to provide its services, so the tools to gain trust in a sharing economy are reputation systems and social networks [71]. Finally, there is significant ease of business model imitation recognizable within sharing economy platforms due to low barriers to entry, as well as the platform’s reliance on devices that have Internet access and the technical knowledge of customers using the application [16, 83].

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Safe and Secure Communication between Two Cyber-Physical Systems: A Framework for Security Shahbaz Ali Imran and Sabina Akhtar

Abstract We have seen quick development in the deployment, development and study of CPSs in past decades. However, security threats are already there and quantities of security dangers have likewise been improved yet quantities of new weaknesses, new sorts of assaults and various systems trading off infusions request to investigate more about CPSs in the light of security (Rehman and Gruhn in Technologies 6:65, 2018 [1]; Ozgur et al. [2]). In this study, we examined CPSs that how can we build a safe and secure communication path between two CPSs and secure the correspondence of CPS with the help of MQTT protocol. We build a SCADA system to under the principals of proposed framework for the absolute security and safety of CPSs. Liveness checks have also introduced in our proposed framework to look after the flow of information. As its development isn’t unreasonably simple, for development purposes NODE-RED has been used to simulate the framework. We have planned the progression of its correspondence we set two CPS at two different places, which controls the water from well to various tanks. In this development diverse checks for securing the ports have been used. To test the presented framework for security we have used two different tools for generating Cyber-attacks named as LOIC and XOIC.

1 Introduction In this era of technology home appliances and healthcare devices, etc. are communicating over the network and also have the basic foundation so they are thought to be that they are not defenseless and are not compromise-able from a wide range of CA, which is really unrealistic in reality [3]. The main concern or fundamental assignment is making up the structure for Cyber-Physical Systems that can shelter S. A. Imran (B) Department of Software Engineering, Bahria University, Islamabad Campus, Islamabad, Pakistan S. Akhtar Department of Computer Science, Bahria University, Islamabad Campus, Islamabad, Pakistan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_19

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as well as can be able to secure from CAs. We build a framework a security framework which will secure the communication between two cyber-physical systems. As Cyber-Physical System (CPS) is the combination of various components, diverse hardware components, for example sensors, embedded systems, and actuators, etc. Same software has various components that are used for monitoring and controlling the end result is that the connection of components and the integration with each other cause the major threat of CA (Cyber-attack). For better understanding of the CPS current framework and seriousness of CA and how to ensure the framework with this sort of CA can be useful to build up a protected framework. Subsequently, we should be fit for distinguishing the limitations or characterized cutoff points of CPSs that they should call attention to towards different sorts of CA and design approaches to protect through those CA. Well the principle issue in CPS is its complicity in the structure and heterogeneity of its components. Because of this (Heterogeneity) conduct numerous security, protection and assurance’s dangers have been presented. With that much multifaceted nature of CPS, hazardous sort of escape clauses, weaknesses and dangers have now gotten hard to handle, besides most recent sort of issues of security have developed which are difficult to inspect and these assaults are untraceable. Broad information and understandings of digital assaults, dangers and weaknesses is critically required for the advancement of safeguard component [4, 5]. The investigation of flow security of CPS and controls that are private will likewise take us to bring up the escape clauses and new research study related viewpoints. [3]. in this research, we built up our own new sheltered/safe and secure framework for CPSs utilizing Liveness. The main question arises here is what makes CPSs so complex? And the answer in my point of view is its heterogeneity, the strong connection between its components (Fig. 1). In this research we have proposed our framework for CPSs. We have used MQTT (Message queue telemetry transport) protocol for communication between CPSs.

Fig. 1 CPS security structure with three symmetrical directions: security, CPS segments, and agent CPS systems [29]

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Based on the phenomenon of publish/subscribe .It’s a lightweight protocol and works on the top of TCP/IP protocol. MQTT pub/sub communication model offers tons of advantages for example scalability, efficient information and low consumption of network bandwidth etc.

1.1 Proposed Framework for Safety and Security of CPS The above framework states that the information will flow from source CPS. Whilst the information reaches the destination. The information will experience different checks [4, 6]. We have implemented safety and security checks and that triggered information needs to pass those checks else its send back to the source. Communication is done by the MQTT protocol. Then there is an information control mechanism after that there’s another safety and security check about the information (Packet loss etc.).If there is a loss of information at any stage it will send back to the source and source needs to be resends until the correct information is not received (Fig. 2).

Fig. 2 Proposed framework

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2 Related Work For the better comprehension of CPSs we have encountered past explores as CPSs and their shortcomings are a lot of a considered area of late; an ample work rikishan with his collaborators has present their own structure for the security for CyberPhysical Systems. They have named their structure as a “NCPS TESTBED” and their game plan involves two unclear equipment’s which are placed in two particular spots. One is arranged in Miami, Florida and the other one is in Philadelphia. They have breathed easy information between these two unclear spots using MQTT show to check their system. The authors of this paper have moreover analyzed three sorts of ambushes. One is MIA which is message integrity attack, second DA which is Delay Attack and third is PDA which is Packet Drop Attack that are also showed up in their proposed structure picture referred to underneath [2] (Fig. 3). The paper created by Paul at all. about the CPS security considers the plan and investigation of different moving objective guards for perceiving and secluding uprightness assaults on cyber-physical systems. To counter model mindful assailants, the moving objective protection presents stochastic, time-differing boundaries in the control framework. The fundamental irregular elements of as far as possible an aggressor’s model information and hinders his/her capacity to develop covert assault groupings. Initially, they consider a half breed framework where boundaries inside the current plant are exchanged among various modes, empowering both the location and distinguishing proof of noxious hubs. Next, they explore the expansion of an all-encompassing framework with elements that are coupled to the first plant so an assault on the first framework is uncovered by sensors estimating the all-encompassing plant. In conclusion, they have proposed the utilization of sensor non-linearity to hide typical operational conduct from an assailant who has altered the framework state, further thwarting his/her capacity to gather data about the timechanging elements. At long last, they dissect the attack identify capacity for each moving objective safeguard by researching expected lower limits on the identification measurement [7]. This paper presents the decarbonisation in the provision of energy is critical to overseeing worldwide ozone depleting substance outflows and consequently moderating environmental change. Computerized advancements, for example, huge information [8]. As the main part of this paper, existing examination on CPS security is considered and organized under a brought together system. Shrewd vehicles, as a CPS application, were additionally investigated under the proposed system and new assaults are recognized and tended to. The Control Area Network (CAN transport) is a predominant sequential correspondence convention embraced in mechanical CPS, particularly in little and huge vehicles, ships, planes, and even in drones, radar systems, and submarines. Sadly, the CAN transport was planned with no security contemplation. They at that point propose and show a covert focused on Denial of Service (DoS) assault against CAN. Experimentation shows that the assault is powerful and better than assaults of a similar classification because of its covertness and capacity

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Fig. 3 Proposed framework [2]

to dodge identification from current countermeasures. Two controls are proposed to protect against different ridiculing and DoS assaults on CAN. The first expects to limit the assault utilizing a component called ID-Hopping so that CAN intervention IDs are randomized so an assailant would not have the option to target them. ID-Hopping increases current standards for aggressors by randomizing the normal examples in a CAN arrange. Such randomization frustrates an assailant’s capacity to dispatch focused on DoS assaults. In view of the assessment on the testbed, the randomization component, ID-Hopping, holds a promising answer for focused DoS, and figuring out CAN IDs, and which CAN systems are generally defenseless. The subsequent countermeasure is a novel CAN firewall that means to keep an assailant from propelling a plenty of nontraditional assaults on CAN that current arrangements don’t enough address. The firewall is set between a possible assailant’s hub

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and the remainder of the CAN transport. Traffic is controlled bidirectional between the fundamental transport and the assailant’s side so just benevolent traffic can go to the primary transport. This guarantees an assailant can’t self-assertively infuse vindictive traffic into the primary transport. Showing and assessment of the assault and firewall were directed by somewhat level examination, i.e., “Bit slamming”, of CAN’s traffic. Results show that the firewall effectively forestalls the secretive focused on DoS assault, just as, other late assaults. To assess the proposed assault and firewall, a testbed was manufactured that comprised of BeagleBone Black and STM32 Nucleo-144 micro regulators to reenact genuine CAN traffic. At long last, a structure of an Intrusion Detection System (IDS) was proposed to supplement the firewall. It used the proposed firewall to add situational mindfulness abilities to the transport’s security pose and distinguish and respond to assaults that may sidestep the firewall dependent on specific standards [9]. Cyber-physical systems (CPSs) security has become a basic exploration theme as increasingly more CPS applications are having expanding effects in assorted modern areas. Because of the tight collaboration among cyber and physical segments, CPS security requires an alternate procedure from the customary data innovation security. In this paper, they have proposed an AI based attack/assault discovery (AD) plot, as a component of our general CPS security procedures. The proposed conspire performs AD at the physical layer by demonstrating and checking material science or physical conduct of the physical resource or cycle. In building up the proposed AD plot, they have dedicated their endeavors on cleverly inferring notable marks or highlights out of the huge number of uproarious physical estimations by utilizing physical information and utilizing progressed AI procedures. Such determined highlights not just catch the physical connections among the estimations yet additionally have more discriminant power in recognizing typical and assault exercises. In their test concentrate for showing the adequacy of the proposed AD conspire, they considered rock solid gas turbines of consolidated cycle power plants as the CPS application. Utilizing the information from both the high-constancy reproduction and a few genuine plants, they exhibit that their proposed AD plot is viable in early discovery of assaults or noxious exercises [10]. The combination of cyber advancements in technology with the physical world offers ascend to complex systems alluded to as Cyber Physical Systems (CPS), for instance, fabricating, transportation, shrewd framework, and water treatment. A considerable lot of those systems are essential for the basic framework and need to perform securely, dependably, and safely continuously. CPS security is trying when contrasted with the customary IT systems. A foe can bargain the framework in both the cyber and the physical areas. In any case, the extraordinary arrangement of advancements and cycles being utilized in a CPS additionally raise open doors for safeguard. CPS security has been drawn nearer in a few different ways because of the intricate cooperation of physical and cyber parts. In this work, an extensive report is taken to sum up the difficulties and the proposed answers for making sure about CPS from a Physics-based point of view [11]. In complex vehicular cyber physical systems (CPS) organize condition, there exist trust-based suggestion plots that could adequately channel a large portion of

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the bogus information. However, these plans may deplete vehicular system assets, including vitality, calculation capacity, and capacity, causing a system blackout. To guarantee constant information transmission and security in a vehicular CPS organize, a novel trust-based suggestion plot (TBRS) is proposed in this exploration. The primary commitments introduced in this paper are as per the following: (1) the isomerism of vehicular sensor hubs in CPS systems, where the distinctions of portability between ordinary hubs and egotistical/vindictive hubs are dissected. Also, a trust model is planned dependent on conveyance believability and position closeness of hubs. This model can modify the weight coefficient of direct trust boundaries, which can be used to investigate the protected and trustable errands in information transmission, and (2) to address assaults brought about by egotistical/pernicious hubs and sparsity issues of hubs in vehicular CPS, a safe separating calculation dependent on K-Nearest Neighbor (KNN) helpful processing is proposed. The trust esteem is determined by the proposed trust model. The helpful registering based sifting calculation is used to channel bogus proposal trust esteems from egotistical/malignant hubs, which extraordinarily lessens impedance of childish/noxious hubs on the exhibition of vehicular CPS arrange. The method of ascertaining trust esteem helpfully and suggest trust esteem makes the TBRS model safer and solid than past ones. Trial results show that the TBRS conspire is better than the current plans as far as conveyance rate, transmission deferral and dependability. Additionally, the obstruction against illicit listening in assaults has expanded by a normal of 32.53% when contrasted with different calculations [12]. Danger evaluation is a basic cycle to guarantee a trustworthy Cyber-Physical Systems structure. Customary danger appraisal thinks about just physical disappointments. For current Cyber-Physical Systems, disappointments brought about by cyberattacks are on the ascent. The focal point of most recent exploration exertion is on wellbeing security lifecycle combination and the extension of demonstrating formalism for hazard evaluation to join security disappointments. The connection among wellbeing and security and its effect on the general framework configuration, just as the dependability misfortune coming about because of disregarding security disappointments are a portion of the ignored exploration questions. This paper tends to these examination inquiries by introducing another security structure technique named Cyber Layer of Protection Analysis (CLOPA) that stretches out existing LOPA system to incorporate disappointments brought about by cyber-assaults. The proposed technique gives a thorough numerical definition that communicates quantitatively the tradeoff between structuring an exceptionally solid versus a profoundly secure CPS. We further propose a co-structure lifecycle measure that coordinates the wellbeing and security hazard appraisal measures. We assess the proposed CLOPA approach and the coordinated lifecycle on a viable contextual analysis of a cycle reactor constrained by a modern control testbed, and give a correlation between the proposed CLOPA and current LOPA hazard appraisal practice [13]. They have returned to past reviews on cybersecurity and security co-designing methodologies and played out a precise writing overview of such methodologies. We characterized a multi-trait scientific classification for such methodologies and

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we utilized this to investigate them. They accordingly gave a thorough conversation on the ongoing advances in cybersecurity and wellbeing co-designing. The joint investigation of wellbeing and security has been an objective of scientists in the two fields for over thirty years. Notwithstanding the life span of the issue and the significant volume of exploration results on wellbeing and security co-building that has been created in the previous not many years, a few significant issues stay open. Through their audit, they distinguished and examined such issues and the exploration challenges that they infer. Later on, among the numerous conceivable examination challenges in the field, they intended to zero in on building up a comprehensive, incorporated, graphical model based, and wellbeing and security necessities elicitation co-designing methodology, pertinent to the independent vessel space [14]. Maintainable urban portability and gridlock are the key difficulties in a savvy city. By the by, a maintainable versatility approach, for example, continuous ridesharing as an answer is probably going to come up short, if not incorporated with activities planned for expanding the consciousness of residents, support through motivating forces and impacting their conduct change. This article breaks down the chance of evaluating an individual commitment toward maintainability and complementary impetus way to deal with support deliberate conduct advancement toward reasonable portability arrangements. Moreover, the difficulties looked by the intrigued carpoolers were examined. This work proposes an IoT-based system called WeDoShare for continuous ridesharing as an answer planned for settling the issues of carpoolers and measuring their manageability commitment with an equal auto-impetus approach. Moreover, on head of informal organization, a gamification approach is proposed to include, spread, and connect with the residents in ridesharing action [15]. Vivek Kumar Sehgal in his exploration of security has clarified that “Disasters and mechanical occasions have ended up being genuine. PCs and contraptions have progressed a lot in early years or decades anyway almost no has yet been done to handle trouble yet enormously huge field of security that manages physical of individual components. Accompanying the unavoidable enlisting, the (IoT), universal appropriated registering and its extension fog handling, presently ended up being possible to give security spread to people and upset any offense against them. They have given framework of security that joining unpreventable and wearable figuring, IoT, cloud, and haze processing to ensure individuals and square any setback” [16]. In another paper, Ashraf Tantawy with his co workers has sought after an incorporated way to deal with structure the security arrangement of Cyber-Physical Systems. Findings states that by investigating the framework of physical conduct, it was seen that not everything assaults could cause a framework danger, a peril may set aside some effort to create, and it might be conceivable to invalidate the assault impact. In this manner, the paper features the requirement for an incorporated way to deal with structure. Model-based structure is a foundation for this coordinated way to deal with be fruitful. For effective mechanical selection, a structure mechanization device chain that incorporates physical and digital area demonstrating, just as assault displaying and infiltration testing, should be created. A few examination bearings could be distinguished from this work. Initially, the assailant profile was overlooked

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in the danger evaluation (all probabilities were thought to be 1, certain occasions). This may prompt non-ideal framework structures. Aggressor’s gang’s diverse information and range of abilities, and this should be caught in the danger appraisal measure. What’s more, the likelihood that a cycle peril may not be delivered despite the fact that a cycle upset is caused because of random assailant activities was not thought of. This factor may fundamentally diminish the general probability of a cycle risk post a digital assault. Second, best assaults in the CPS area are secret assaults that beguile the client by means of simultaneous HMI control. These assaults have complex structures and numerous goals that should be concentrated in more profundity. Third, digital assaults may prompt a framework breakdown, and hence ought to be remembered for the danger appraisal as a starting reason. This may prompt a reformulation of the current mechanical practice for risk distinguishing proof and insurance contemplates. At long last, while mimicking the physical cycle for various digital assault activities, it was expected that the framework aggravations are inside working cutoff points. This supposition might be abused if the assault is sorted out against numerous framework units at the same time, bringing about the framework being dependent upon simultaneous aggravations and a digital assault. The investigation of the synthesis of segment hazard evaluation to yield a general framework hazard appraisal measure is an intriguing examination course. At long last, the danger evaluation measure introduced in this work is model based, thus depending on known weaknesses and assault situations. Nonetheless, day zero assaults speak to a huge danger and challenge to CPS security. The joining of the model-based methodology and AI approaches utilized for day zero assault discovery with regards to online danger evaluation is a significant future examination bearing [17]. Jiajun Shen with Dongqin Feng has initially propose a MSSG model for crosslayer security configuration in scrambled CPS, by which the collaborations among aggressor and IDS are caught. The connection between safeguard technique of IDS and cross-layer security of encoded CPS are portrayed by the definition and measurement of discovery pace of locator, continuous execution in digital layer, and control execution in physical layer, in light of which unadulterated procedure and mixed strategy PBNE are dissected individually. Our outcomes show various equilibria of the game just as conditions under which these equilibria can occur. This will inevitably enable the protector to choose the ideal decision against likely assaults. As per the consequences of harmony investigation, a cross-layer security structure calculation is proposed with a scrambled CPS case being read for exhibiting the adequacy of our technique. They have additionally expressed the future work wherein the investigation of issues concerning more sorts of aggressors would be intrigued, since they would really like to pick various kinds of assault so as to accomplish their objective with least expense. It shows that distinctive earlier likelihood ought to be allocated. Furthermore, the evaluation of recognition rate would be diverse also because of various kinds of assailants, and the sorts of finders along with their distinctive discovery rates on each sort of aggressor ought to be taken into accounts. The MSSG model and its balance investigation will at that point be significantly more complex and intriguing [18].

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The article presented by Hui Yang is a novel Brain-like based distributed Control of security (BLCS) engineering in mist radio and optical systems for CPS, which can explain the digital security issue without the protection presentation. The practical substances of the engineering and interworking methodology in secure control mode are introduced and examined. The exhibitions are shown on the testbed for secure disseminated control. We likewise evaluate its exhibitions in the situation with weighty traffic burden and contrast it and the other plan. Mathematical outcomes show that BLS plan can find malevolent regulators and security steering, while decrease the normal question rate, way provisioning inertness, parcel misfortune likelihood and blocking likelihood. Later on, we will investigate more modern streamlining procedures alongside solo learning and fortification learning based BLCS. These can additionally upgrade the security, unwavering quality, and exactness of quickly developing CPS structures [19]. HAO PENG with his co-workers study the impact of falling disappointments and power in genuine informal organizations, develop distinctive Cyber-physical systems models which comprise of related physical-assets and computational-asset systems. Then, break down the unwavering quality of an associated Cyber-physical systems by estimating the estimation of the general size of the giant part subsequent to falling disappointments. In view of three sorts of system centralizes, they structure seven layers between joins techniques to change the geography of reliant CPS. By looking at the exhibition of these techniques in a Cyber-physical systems, they find that it is more favorable to change between joins with high-values centrality hubs than with low-values. Simultaneously, the reproduction results show that the high eigenvector centrality trading procedure is better than different methodologies in upgrading the dependability of a Cyber-physical systems. This finding can help organize developers to plan a superior system structure that can endure random system assaults. In any case, their proposed models have a few constraints, which could be their future work. In this examination, they just consider the ’balanced’ correspondence as a relationship in various systems. While a few analysts manufacture the ‘balanced’ correspondence to speak to between joins geography in a CPS, this paper despite everything chooses monster components as the practical part. The little and segregated components could likewise work locally truly. [20]. The ongoing spate of cyber security attacks has strengthened the significance of cyber security. Cyber security is not, at this point only a specialized issue requiring the capability and abilities of specialized specialists, it is a worldwide wonder requiring the consideration of partners across various data areas. We sort out this extraordinary issue on client driven security and safety parts of CPS with the point of filling holes between client conduct and the structure of complex CPS. These incorporate various partners’ jobs and duties, client driven dynamic abilities and situational mindfulness, client experience structure, moderation of client blunders and examining their effect, versatile danger the board, client or administrator’s trust, security and safety in the gadget’s or framework’s verification, access control, and arrangement the executives, thus, the connection to the improvement of the framework’s security and security in the cyber-physical world. It is assumed that arrangement of client situated cycles, norms, and rules for security and Safety are needed to adapt to the complexities and

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interoperability of CPS. As such, this uncommon issue expects to distribute the most recent progressions in client driven security and Safety methods and controls for CPS and related parts [21]. Second, further expansions to our proposed Meta model may get essential because of extra client necessities and CPS advancement. It will be great to direct a client study to decide exact prerequisites of security the executive’s specialists past the ones depicted in scholastic writing. The outcomes would then be able to be utilized to trigger further enhancements and may either finish in an independent security item or lead towards extra alterations. A third subject of intrigue is the assortment of information for CPS Bundles. Assembling and keeping up the information can incorporate merchants and administrators of CPS. The model can likewise be supplemented by predefined vocabularies for explicit ascribes to stay away from equivocalness and straight forwardness ease of use [22]. Special or uncommon issue center around cyber security for cyber-physical systems (CPSs). The systems have gotten exceptionally perplexing, more modern, wise and independent. They offer extremely complex communication between heterogeneous cyber and physical segments; also to this unpredictability, they are presented to significant aggravations because of unexpected and purposeful occasions which make the expectation of their practices an exceptionally troublesome assignment. In the interim, cyber security for CPS is attracting the thought of assessment scientists in both industry and the insightful network of scholars since the amount of cyber-attacks have extended and their practices have gotten more current, for the most part known as zero-day threats [23]. The view of DETCS, co-plan technique between double control of security and correspondence with the actuator deficiency and attacks for nonlinear Cyber-physical systems were examined. Initially, consolidating with edge figuring, the processing task was somewhat relocated to the edge gadget, and a nonlinear Cyber-physical systems shut circle model was built up the shortcomings of actuators that are incorporate, DoS assault and discrete occasion setting off conditions. Second, utilizing less traditionalist strategies, for example, relative Bessel-Legendre disparity, a hearty spectator for state and shortcoming assessment and the co-structure technique for the double control of security and correspondence with actuator deficiency and DoS assault were given. At last, the reenactment results further show that the proposed technique not just has the capacity of double control of security, yet in addition can precisely appraise framework shortcoming and state progressively, and viably spare correspondence assets under the actuator issue and DoS assault. Nonetheless, the preparing technique for DoS assault is detached in this paper, and how to manage flaw and assault, by developing on the web assault identification instrument in a functioning manner [24]. The security-based DSE structure, considering security assaults and key material situation is introduced. The paper shows the structure’s capacity of finding the most secure or execution ideal, yet secure arrangement, considering a protected framework apportioning, task portion, security usefulness determination, and key material situation for an unpredictable framework involving various deliberation layers. A

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limitation that are known to the framework is the reliance on security ace data for controlling the circumstances and security threats/shortcoming and preowned the risk of parts. Future work will focus in on fusing other security evaluation techniques [25].

3 Proposed Methodology The proposed methodology is quite simple and easy to use. Two Cyber-physical systems has been placed far from each other. As we can see in Fig. 4 that it’s the system we have shown in the figure is similar to SCADA. But we take the example of Cyber-physical system through SCADA which is developed under the principals of our presented or proposed framework. Figure 4 clearly shows the information flow from source to target but here water is our information. The stream flows from source to destination but under the checks of “Liveness”, “Safety” and “Security”. Here liveness checks plays an important role when the information is passing over MQTT “Liveness-checks” will ensure that the desired information has been received by the receiver or not if the information is faulty or lost or compromised than liveness track the last state of message that has been received in any of the stages and sends back to the source as an acknowledgement that the desired package has not been received by the receiver and will continue doing the same until and unless correct information is received by the receiver. Secure ports has been used to build the system During the development of this system we have simulate our framework by set an alarm alert means whenever the water or information level about to cross the boundaries it will generate an alarm alert. We have also set some rules for our framework. There are a few limits for water level in our framework. Our proposed framework will send the data constant except if and until the total and precise data will be gotten by the recipient.

3.1 Source CPS The initial phase in building up our framework is distinguishing the source for CPS. We have set one CPS as a wellspring of data. We have not structured the CPS, we have positioned it for beginning the progression of data, as the data that is created

Fig. 4 Water transfer SCADA system [26]

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from this source will course through the following hubs, so that there will be no ambiguity in source’s legitimacy.

3.2 Liveness What is “Liveness”? The answer of this question is quite simple we here we didn’t mean the real time or Live traffic here Liveness refers that the triggered information from the source will receive as it is to the Destination without any kind of loss even during the CAs. This validness has a significant essentials in this kind of framework, as data is the principle perspective and on the off chance that the sent message isn’t gotten at the beneficiary end, the entire CPS correspondence situation will be in risk. So we can say that without any hesitation that Liveness holds a significant place in this research of CPSs security. Liveness checks assures the information that if there is any loss in information than these Liveness checks sends back the source until the full information is received by the receiver.

3.3 Message Queue Telemetry Transport (MQTT Protocol) It’s a very lightweight transmission/communication protocol. Adjacent to its little estimate, low control use, directly off the bat, I encountered the inspiration driving using MQTT, Message Queue Telemetry Transport was designed for Internet of Things (IoT). Why we used MQTT: • A convention with light weight. Consequently, it’s definitely not hard to realize in software and speedy in the transmission of data. • It relies upon the data type and technique for the message. Clearly, we know how speedy our errand individual’s message movement. • Limited data bundles. Hence, low usage. • Unexpectedly Low utilization of power.

3.4 Controls At this stage we control the flow information that we have defined in our scripts. We have utilized various checks which controls the flow of data or message stream. The information flow is controlled by LIVENESS. For this situation we present the data stream as water stream, which means if the threshold exceed the defined boundaries level, than it should have to generate an alert.

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3.5 Security Security is the most critical and important point in every aspect of life. For that purpose, we secured the ports and also define security related checks and avoid dangerous substance to vanquish the security risks [27, 28]. Liveness is furthermore an important check for security as well.

3.6 Targeted CPS At this stage the destination CPS takes place from where the information is destined to go. Here we have placed the other CPS at different city in our simulation. The flow of data/information is done via WAN by utilizing MQTT. This is the point where we check the correctness of information whether the desired information has been received as the same way by the sender without any loss.

4 Results and Discussion This area depicts the general stream and working of the proposed framework utilizing MQTT framework. We have applied CAs on the framework to check its immunity or how it can bare. However the results/outcomes indicated the insusceptibility of framework for CPSs. Beneath referenced figures will explain about the beginning and halting of the catch for the progression of data (Figs. 5 and 6). The over two figures plainly shows when the beginning (run) hits we can see the status in our mosquito’s specialist sensors and the data streams as needs be. Graphical yield is appeared in the picture given underneath as Charts (Fig. 7). Fig. 5 Initializing water flow [2]

Fig. 6 Back-end output

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Fig. 7 Graphical output after starting the run button

4.1 LOIC LOIC is a tool which generates different types of CA in the realm of Cyber. Four Chan-partnered has developed this tool. LOIC has numerous options of attacks and it’s GUI is user-friendly and easy to use.

4.2 Immunity Check To test the immunity of framework we have used LOIC to apply a CA (DDoS) on our security framework. Underneath figures show that the CA was applied on our security framework yet the data stream is normal. Below is the preview of LOIC while DDoS CA was attacking on the CPSs framework (Fig. 8). “192.168.48.1” That IP was assigned to our system. We assigned different ports to LOIC and Node-Red so that we can easily distinguish the flow of information during and after the attack. Figure 9 shows that how the framework resist against the CA. Where the starting flow of information from the “Source CPS” is more noteworthy than or equivalent to the threshold which is 150 and the level reaches to the top which we set 200 so the alarm should be executed. We experienced that the alert is working absolutely fine as sound alert goes “on” and “off” normally. In this investigation, we have demonstrated the significance of liveness by executing and contrasting our proposed framework and the other.

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Fig. 8 LOIC attacking interface

Fig. 9 At the time of DDoS Attack was generated

5 Conclusion This paper presents the framework for CPSs i.e. safe and secure. We built up a secure framework for CPS which uses MQTT (Message Queue Telemetry Transport) Protocol. Although, various strategies are utilized to fabricate the framework for the CPSs security and safety, nonetheless, the presented framework that uses the MQTT protocol. In assistance of presented framework we make sure that the communication is safe and secure between the CPSs. NODE-RED is used to construct the presented framework of safety and security. We build a SCADA system by applying the rules of our presented framework which control the flow of water from the originated point which is “Source CPS” to the focused on “Targeted CPS” that is situated in another city. Further, we have made sure about the flow of information/communication between these two systems by utilizing the phenomenon of Liveness. Additionally we executed attack called DDoS on the presented framework of security to assure the invulnerability of the framework. Additionally, we indicated

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that the ordinariness or in-susceptibility of the framework for CPS against CA. Also, more innovative work is required on the security of CPSs in the light of AI (Artificial intelligence).As AI algorithms are used widely in every field. With the help of the prediction algorithms we can be able to predict the CA and prepare ourselves or can easily take the precautionary measures.

References 1. Rehman, S.U., Gruhn, V.: An effective security requirements engineering framework for cyberphysical systems. Technologies 6, 65 (2018) 2. Ozgur, U., Nair, H.T., Sundararajan, A., Akkaya, K., Sarwat, A.I.: An efficient MQTT framework for control and protection of networked cyber-physical systems. In: 2017 IEEE Conference on Communications and Network Security (CNS), 9–11 Oct 2017 3. Dong, P., Han, Y., Guo, X., Xie, F.: A security and safety framework for cyber physical system. In: International Conference on Control and Automation, 2014 4. Poniszewska-Maranda, A., Kaczmarek, D., Kryvinska, N., Xhafa, F.: Studying usability of AI in the IoT systems/paradigm through embedding NN techniques into mobile smart service system. Computing 101(11), 1661–1685 (2019). https://doi.org/10.1007/s00607-018-0680-z 5. Poniszewska-Maranda, A., Majchrzycka, A.: Access control approach in development of mobile applications. In: Younas, M. et al. (eds.) Mobile Web and Intelligent Information Systems, pp. 149–162. Springer, Heidelberg (2016). MobiWIS 2016, LNCS 9847. https:// doi.org/10.1007/978-3-319-44215-0_12. ISSN 0302-9743, ISBN: 978-3-319-44214-3 6. Poniszewska-Mara´nda, A.: Access control coherence of information systems based on security constraints. In: SafeComp 2006: 25th International Conference on Computer Safety, Security and Reliability, LNCS 4166, pp. 412-425, Springer, Heidelberg (2006) 7. Griffioen, P., Weerakkody, S., Sinopoli, B.: A moving target defense for securing cyber-physical systems. IEEE Trans. Autom. Control (2020) 8. Inderwildi, Oliver, Zhang, Chuan, Wang, Xiaonan, Kraft, Markus: The impact of intelligent cyber-physical systems on the decarbonization of energy. Energy Environ. Sci. 13(3), 744–771 (2020) 9. Humayed, A.A.: Securing CAN-based cyber-physical systems. PhD diss., University of Kansas, 2019 10. Yan, W., Mestha, L.K., Abbaszadeh, M.: Attack detection for securing cyber physical systems. IEEE Internet Things J. 6(5), 8471–8481 (2019) 11. Ahmed, C.M., Zhou, J.: Challenges and opportunities in CPS security: a physics-based perspective. arXiv (2020): arXiv-2004 12. Tianbo, L., Zhao, J., Zhao, L., Li, Y., Zhang, X.: Towards a framework for assuring cyber physical system security. Int. J. Secur. Appl. 9(3), 25–40 (2015) 13. Tantawy, A., Abdelwahed, S., Erradi, A.: Cyber LOPA: a new approach for CPS safety design in the presence of cyber attacks. arXiv preprint arXiv:2006.00165 (2020); Younis, O., Moayeri, N.: Cyber-physical systems: a framework for dynamic traffic light control at road intersections. In: 2016 IEEE Wireless Communications and Networking Conference, vol. 4, no. 6, pp. 1–6, 2016 14. Sehgal, V.K., Patrick, A., Soni, A., Rajput, L.: Smart human security framework using Internet of Things, cloud and fog computing. In: Proceedings of Intelligent Distributed Computing, 2015, pp. 251–263 15. Tripathy, Ajaya K., Tripathy, Pradyumna K., Mohapatra, Ambarish G., Ray, Niranjan K., Mohanty, Saraju P.: WeDoShare: a ridesharing framework in transportation cyber-physical system for sustainable mobility in smart cities. IEEE Consumer Electron Mag 9(4), 41–48 (2020)

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16. Grega, W., Kornechi, A.J.: Real-time cyber-physical systems—transatlantic engineering curricula framework. In: Proceedings of Federated Conference on Computer Science and Information Systems (FedCSIS), pp. 767–774 (2015) 17. Tantawy, A., Abdelwahed, S., Erradi, A. and Shaban, K.: Model-based risk assessment for cyber physical systems security. Comput. Secur. 96, 101864 (2020) 18. Gu, A., Yin, Z., Cui, C., Li, Y.: Integrated functional safety and security diagnosis mechanism of CPS based on blockchain. IEEE Access 8, 15241–15255 (2020). https://doi.org/10.1109/ ACCESS.2020.2967453 19. Yang, H., et al.: BLCS: brain-like based distributed control security in cyber physical systems. arXiv preprint arXiv:2002.06259 (2020) 20. Peng, H., et al.: Security analysis of CPS systems under different swapping strategies in IoT environments. IEEE Access 8, 63567–63576 (2020) 21. Saxena, N., Cardenas, A.A., Beyah, R., Lu, R., Choo, K.K.R., Chen, Y.: Introduction to the special issue on user-centric security and safety for CPS, 1–2 (2020) 22. Schlette, D., Menges, F., Baumer, T., Pernul, G.: Security enumerations for cyber-physical systems. In: IFIP Annual Conference on Data and Applications Security and Privacy, pp. 64–76. Springer, Cham (2020) 23. Sedjelmaci, H., Guenab, F., Senouci, S.-M., Moustafa, H., Liu, J., Han, S.: Cyber security based on artificial intelligence for cyber-physical systems. IEEE Netw 34(3), 6–7 (2020) 24. Zhao, L., Li, W.: Co-design of dual control of security and communication for nonlinear CPS under DoS attack. IEEE Access 8, 19271–19285 (2020) 25. Gressl, L., Rech, A., Steger, C., Sinnhofer, A., Weissnegger, R.: Security based design space exploration for CPS. In: Proceedings of the 35th Annual ACM Symposium on Applied Computing, pp. 593–595 (2020) 26. https://flows.nodered.org/flow/b1d00d13f1db357ac686f9379731060c 27. Poniszewska-Maranda, A., Matusiak, R., Kryvinska, N., Yasar, A.U.H.: A real-time service system in the cloud. J. Ambient Intell. Humanized Comput 11, 961–977 (2020). https://doi. org/10.1007/s12652-019-01203-7 28. Poniszewska-Mara´nda, A.: Security constraints in access control of information system using UML language. In: Proceedings of the 15th IEEE International Workshops on Enabling Technologies: Infrastructure for Collaborative Enterprises (WETICE-2006), Manchester, Great Britain, June 2006 29. Humayed, A., Lin, J., Li, F., Luo, B.: Cyber-physical systems security—a survey. IEEE Internet Things J. 4(6), 2017

Investigation the Scope of Social Inequality by Accessing Telecommuting from Home Under Corona Pandemic Katja Zöllner and Rozália Sulíková

Abstract Home office access is determined by employers and employees. Special researches revealed access inequality. The current COVID-19 Pandemic 2020 increased the frequency of home office in companies while life and working conditions are changing concurrently and depressing employees respectively employers. The research question focuses on the changing scope of teleworking and its influence on access differences accompanied by inequality. The research fundamentally bases on an extensive literature review using qualitative content analysis as outlined by Mayring to interpret the findings of 41 more comprehensive studies. Teleworking access under crisis crystallized more social inequality in contrast to the past and keeps employees under pressure and threats. This literature research can reveal relevant data and policy implications for tackling social inequalities that will moreover arise in the labor market under the long-term pandemic of COVID-19.

1 Introduction The access to home office is rapidly raising worldwide because of the Corona Pandemic. Followed the relaxation of the restrictions after the first ‘’German Lockdown” the worldwide incidence of infections by COVID-19 is raising rapidly to nearly 15,000 infections by day. Since November 2020 a partial lockdown has been instructed in Germany and EU-wide while Ireland was already restricted in their public life. By 16th of December 2020 the second lockdown had to been introduced urgently because of increasing incidence of infections of COVID-19 and mortality of nearly more than 500 deceased a day. In spite of developed vaccines and soon following vaccinations, the living and work conditions accompanied by applying K. Zöllner (B) · R. Sulíková Faculty of Management, Comenius University in Bratislava, Odbojárov 10, P.O. BOX 95, 820 05 Bratislava 25, Bratislava, Slovak Republic e-mail: [email protected] R. Sulíková e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_20

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social distancing will still remain until herd immunity will achieved. Rebmann et al. already concluded lacks in creating pandemic plans in the United States after the H1N1 Pandemic [39] and the COVID-19 crisis revealed still existing lacks in flexible adaption of social and working conditions worldwide towards crisis and especially analysed in Germany by the Mannheimer study led by Blom [10]. Conversely to the H1N1 Pandemic the COVID-19 crisis consisting of strong sustained health and economic consequences for citizen around the world because of the high-level infectiousness. The first wave of crisis has forced unprepared employers to react and adapt working conditions ad hoc. This sudden situation released in some cases problems, of which one of them related to inequality handling employees giving them access to home office. It is a problem which was already existent in the past. Following the results of the Mannheim study in 2020 [10] the Corona Pandemic changed the conditions of home office access. Statistic data of the IFO Institute in Germany indicates a 20%-increasing of teleworking scope in 2020 [3]. By reducing the risk of infection, teleworking currently gains also momentum to save jobs and companies. In case of persistent COVID-19 Pandemic companies’ success is dependent on flexible Human Resource Management by preserving workers’ attitude and feasibility towards working place in order to cope with the crisis. According Hofmann et al. employees are statistically amassing experience with telework in its extensive form due to the COVID-19 crisis [23]. The economic literature on COVID-19 related to work from home is exploding daily. The Bureau of Economic Research (NBER) released more than 28,000 working papers on this topic of inequality and teleworking and around 11,600 were published by the IZA Institute of Labor Economics. In the focus of policymakers’ debates over the last decades income inequality has been growing in prominence while increasing in Western countries [7]. The success of companies is dependent on the productivity and performance of employers and employees. Human Resource Manager’s respectively executives’ incentive is to apply scientific recommendations as support to build the basis to improve and maintain their workforce. According to the researches of Veiga and Golden in 2005 [19], Gajendran and Harrison in 2007 [18] and Charalampous et al. in 2019 [15] psychological mediators corresponding to individual’s well-being as well as the telecommuting intensity are relevant conditions for individual outcomes. Telecommuting intensity in an adequate range could result in a growth of individual outcomes, like job satisfaction, performance and perceived carrier prospects, which are desirable for employees and their employers. Telecommuting related to quantity and quality could have as well positive as well negative effects on individual outcomes [5, 6]. Especially researches of Guimaraes and Dallow found curve linear effects between job satisfaction and telework intensity [21] and Golden and Veiga inverted U shape linearity effects of the relationship [19]. It implicates that up to a threshold of telework hours the job satisfaction decreases, which can be a guideline for managers and employees themselves. The Federal Ministry for Agriculture, Regions and Tourism of Austria carried out that teleworking produce more work quality like attractiveness of the employer and productivity of the employee proven by better concentration, less distraction, less driving times to the office and thus time savings for getting work done [42]. Assessments of higher efficiency of the meeting

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results through better coordination and cooperation, enabling more personal responsibility and optimizing the work-life balance were also cleared out. Teleworkers save climate-damaging CO2 by reducing car traffic and contributes to environmental and climate protection. Steiner-Ostermann contrasted that for cashiers and mechanics on the assembly line working from home is not suitable, however conception, controlling, customer care, editorial staff, personnel planning, appraisal and programming tasks, accounting, documentation is suitable to arrange as a home office work [43]. She underlined requirements for home-office user that are self-reliance, reliability, tech-savvy, equipment at home, voluntariness, being team-worker. Considering results of Scheerder et al. from 2019 digital inequalities in developing countries are likely to be different because differences between people with higher and lower SES (social economic status) are much bigger in terms of offline resources that affect their physical Internet access, Internet skills, uses, and outcomes [40]. Some employees subjectively assume that they were been disadvantaged in having access to home office and do not really realize that they are not suitable. In case of inequality having access to telework will generate unfortunate work climate [4] and concurrently influences psychological mediators like job satisfaction and performance in an according way. Latest results indicated that if the desire to work from home is unfulfilled [9, 35], the job satisfaction of employees is significantly lower than of those who at least occasionally spend their working hours in the home office. The relevance of equal rights in terms of home office by regulating quantitative and qualitative conditions preserve workers’ performance and psychological stability for gaining companies’ success [20]. The author’s motivation is to draw up the subject frame of teleworking, especially home office work. Following hypotheses will be tested by differentiated analyzing literature review: Hypothesis 1: The scope of telecommuting has increasing since the beginning of COVID-19 crisis. Hypothesis 2: The scope of inequality accessing telecommuting has increasing since the beginning of the COVID-19 crisis. The contribution is to enlighten the existing ambiguous potential of relationship between a positive shift in the home office work, feasibility of employees and the social inequality, e.g., by education status, respectively labor income and gender triggering promotion for critical debate under those are involved. The article is to provide with relevant data and policy implications for tackling social inequalities that will moreover arise in the labor market because of the recent and long-term pandemic of COVID-19 with its consequent increase in home office work and stress level under individuals.

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2 Material and Methods This research intends to answer the following research questions: Is there a change of scope of social inequality by accessing teleworking from home under COVID-19 Pandemic? Is there a change of scope of home office application under COVID19 Pandemic? To answer the proposed research questions an extensive literature review and a qualitative literature analysis was performed. For this purpose, the following databases/library catalogues were used for literature searches: Springer Link, SCOPUS, Research Gate, Google Scholar, Google Search, Wiley Online Library, Forbes, JSTOR, Harvard Business Review. The following search terms were used as part of a targeted literature search: “Working from home before Corona Pandemic”, “working from home under Corona Pandemic”, “social inequality by accessing telework from home before Corona Pandemic”, “social inequality by accessing telework from home under Corona Pandemic”, “social inequality categories related to gender, age, ethnicity, income and education”. Quantitative and qualitative data from scientific studies with cross-sectional, meta-analysis and longitudinal character were collected and analysed. The main profession of analysing field is Human Resource Management. Data included descriptive statistics and were deductively analysed. Thereby tables, graphics and charts with nominal, ordinal and metric data of interviews and surveys are collected and analysed. Analysed surveys included 2,491,259 employees from age 20 to 65 and managers as probands. Elaboration of theoretical basics targeted on selected problems required for achieving the goals. According Bureau of Economic Research (NBER) in total and worldwide 39,306 researches were identified related before the Corona Pandemic and 28,174 within the Corona Pandemic. 150 elaborated potential sources and 41 relevant sources between 2007 and 2020 were analysed and attached as references. These sources enlightened results of researches between 1998 and 2020. Relevant data were collected, categorized, and analysed. In the process, the literature has been coded with the MAXQDA software [27], overviewed by Fig. 1. For this purpose, one main code, reflecting the term “Inequality” in general, leads to two “1. level subcodes”, represented “Inequality work from home within Corona” and “Inequality work from home before Corona”. Eight “2. level-subcodes” are contributed by the topic field “barrier/prefer categories”, from which six “3. level-subcodes” were defined inductively and deductively. The present literature was encoded according to the method of structured content analysis. Thereby passages were encoded in 646 codings and subsequently analysed in relation to the research questions. Synthesizing all data, lead to the following results and conclusion. Frequent individual research works reflected similar results and could lead to an inductive relation leading to possible recommendations. Figure 2 shows the sequences of the process within the structured content analysis related to the research question. The text work consisted of text review, while the categories of the topic related to the analyzing field were formed. Relevant sources were analysed and classified into these categories by elaborating relation to each other. For an overview of the Structured Content Analysis approach, see Fig. 2.

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Fig. 1 Hierarchical code-subcodes model MAXQDA (own depiction of [28])

Fig. 2 The five phases of qualitative content analysis [25]

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3 Results The results originated by coding and synthesis of all included studies with a final sample involving 2,491,259 probands of 41 studies from single studies and metaanalysis. The research findings resulted from different countries, USA, U.K., Canada and European countries like Spain, Italy and Germany.

3.1 Scope of Home Office with the Start of the COVID-19 Pandemic According Statista based on survey by the Ifo Institute with 800 interviewed German HR managers, in the second quarter of 2020, 20% of the German workforce managed permanent from home before the Corona crisis [41]. As a result of the Pandemic, from May 4, 2020 to May 24, 2020, this distribution has increased by around 20% to around 60% [23]. In time of Corona Pandemic 70% of the respondents stated that their office workers almost completely or mostly work in the home office, 21% following the model of a 50:50 office work mixed with home office. Blom et al. revealed that the majority of those in employment continue to work in office to the same extent as before. This value changes in a weekly comparison between 53% and 56% of sample size 3600 employees. Around a quarter of the employed workers are in the home office, compared to pre-Corona times with around 12% of all employed people in Germany [10]. Results of a representative survey on behalf of the Bitkom digital association from 11–15 March 2020 of more than 1000 German citizens aged over 16, 49% employed respondents now works entirely or at least partially in the home office [33]. Hausser et al. evaluated statistical data in the USA pre and during the COVID-19 Pandemic. The outcomes of the teleworking trends before, during and after COVID19 results accorded to observations of which 24% of responders employing fewer than 500 employees and 76% more than 500 employees. Businesses that had 20% to 40% of their workforce teleworking before COVID-19 experienced a slight increase during COVID-19, but plan to significantly increase the teleworker population after COVID-19. Businesses that had 50% or more of their workforce teleworking before COVID-19 had a significant increase during COVID-19, will scale back telework to somewhat after COVID-19, but will still have significantly more teleworkers after COVID-19 than they had before the crisis [22], as displayed in Fig. 3. The proportion of teleworkers before pandemic in 2015 was according Eurofound on average 19.8% in European countries, Romania with 10%, Slovak Republic 12% and Denmark 38% [2]. With an approximate increase of 20% of respondents to a recent Eurofound consultation began to telework as a result of the pandemic, measured in April 2020. Romania with 19%, Slovak Republic 30%, Denmark 48%

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Fig. 3 Teleworker trends before, during and after COVID-19 polling results USA [22]

and Finland 58% and in general the largest proportions of respondents who switched working from home are to be found in Nordic and Benelux countries [2], as shown in Fig. 4. The results are significant to affirm Hypothesis 1 stating that the scope of telecommuting has been increasing since the beginning of COVID-19 crisis. For European countries as well as for USA teleworking quantitative trends are similar been affected by the COVID-19 pandemic.

3.2 Scope of Social Inequality to Access of Home Office with the Start of the COVID-19 Pandemic Tables 1, 2, 3 and 4 gives an overview to more comprehensive researches and as follows aiming to prove hypothesis 2. Social inequality is measured related to different dependent categories like gender, age, ethnicity, income, education, company size and employment conditions. Employment frame conditions are inclusively considered, as hourly pay status, flexible hours schedule status, union member status, government worker status, industry occupation and average daily work time. Researches are provided with information to the author, title, year, sample size, research field. The analysis differentiates between the comprehensible relation in differences in home office access, which depends on skills and cognitive potential of workers and moreover analyses existing inequality in home office access. Differences in occupational structure accounting a difference of 10% between workers in advanced economies and developing ones, by exactly 13% for developing economies against 23% for developed ones. The social, physical, and information technology infrastructure is often less adapted to home-based work in developing countries than in

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Fig. 4 Proportion of workers who started teleworking as a result of COVID-19 by country (%) Eurofound April 2020 [2]

developed ones. The gap between low- and high-income increases from 10 to 15% (developing to developed countries). Finalizing, workers in developed economies are more capable of working from home than in developing countries. In developed countries home office access is not equal prepared to workers, even though employees are capable [8]. Following the aim to compare existing inequalities in accessing telework considering prior and within time of COVID19 Pandemic a condensed outlook is at first provided on times before the Pandemic.

Country

USA, UK, Germany

Germany

Researcher

Adams- Prassl, A. et al.

Mergener, A.

04/2020

Publish date

Occupational Access to the 04/2020 Home Office: A Task-Based Approach to Explaining Unequal Opportunities in Home Office Access

Inequality in the Impact of the Coronavirus Shock: Evidence from Real Time Surveys

Topic

Table 1 Overview of more comprehensive researches, Part 1(4) (own depiction)

Cross-sectional/German BIBB/BAuA employment survey 2018, workers who work at least 10 h a week, work for fee and are at least 15 years old working in all branches and professions in Germany

Cross-sectional/ telework access inequality with focus on education, age, race and ethnicity, foreign-born status, hourly pay status, flexible hours schedule status, country state region member status, employment status, occupation status, gender

Type of research and parameter

(continued)

2018: 20,000 employees

In the US, then first wave of data (N= 4,003) was collected on March 24–26, 2020, while the second wave of data (N= 4,000) was collected on April 9–14, 2020. In the UK, the first wave (N= 3,974) was collected on March 25–26, 2020, while the second wave (N= 4,931) was collected on April 9-14, 2020. In Germany, the data (N= 4,002) was collected on April 9–12, 2020

Proband number and data base

Investigation the Scope of Social Inequality by Accessing … 567

Country

UK

Researcher

Blundell, R. et al.

Table 1 (continued)

COVID-19 and Inequalities

Topic 05/2020

Publish date Cross-sectional/ telework access with focus on employment and ability to earn, family life and health, interactions with existing inequalities along various key dimensions, including socioeconomic status, education, age, gender, ethnicity and geography

Type of research and parameter

Prassl et al. March 24–26th, April 9–l4th 4000 sample size/ Family Resources Survey 2017/18, 20000 households (approx. 80,000 individuals); 2018/19 sample size 20,000 households (approx 80,000 individuals) Labour force survey UK 2019, 4 quarters with sum 160,000/ Understanding Society: Waves 1–9, 2009–2018 and Harmonized BHPS: Waves 1–18, 1991–2009: sample sum: 100,000 of 40,000 households

Proband number and data base

568 K. Zöllner and R. Sulíková

05/2020

Canada

06/2020

Inequality in work-from-home arrangements/ Inequality in the feasibility of working from home during and after COVID19

Teleworking in the Context of the Covid- 19 Crisis

05/2020

National Union of Public and General Employees Canada Deng, Messacar and Morisette

Spain

Belzunegui- Eraso, A. and Erro-Garces, A.

Telework and Time Use in the United States

Publish date

Working remotely and 06/2020 supply-side impact of Covid-19

USA

Wulff Pablionia, S. and Vemon, V.

Topic

Papanikolaou, D. and Schmidt, USA L.D.W.

Country

Researcher

Table 2 Overview of more comprehensive researches, Part 2(4) (own depiction)

Cross-sectional telework and its perceived career consequences in general/ with focus on existing inequality by gender, income, education dependent to telework access

Cross-sectional telework and its perceived career consequences and supply side disruptions/with focus on existing inequality by income, education, age and gender in relation to home office access

Cross-sectional/ home office potential quantitative and qualitative working with focus on existing inequality in relation to telework access

Cross-sectional/ telework access with focus on education, age, race and ethnicity, foreign-born status, metropolitan residence, hourly pay status, flexible, hours schedule status, union member status, govemment worker status, industry occupation and gender

Type of research and parameter

Canada’s Labour Force Survey 2019 sample: 672,000 households 1,200,000 employees

Economic/Performance: American Time Use Survey 2017/2018 sample: 10,040 employees; remote work: CPS sample: 23,984; employment outcomes: CPS ASEC sample: 34,399 employees

Sample: 153,000 employees worldwide prior COVID-19 Pandemic 14,300 employees from 1–16 March 2020

2020 sample: 341 home-based tele-workers, 844 occasional teleworkers. and 6,870 office workers according 2017 2018 ATUS LV Modulc

Proband number and data base

Investigation the Scope of Social Inequality by Accessing … 569

Country

Italy

USA, Germany, Singapore

USA

Germany

Researcher

Cetrulo, A. et al.

Reichelt, M., Makovi, K., and Sargsyan, A.

International Monetary Fund, Brussewich, M., Dabla- Norris, E. and Salma, K.

Alipour, J.V. et al.

Home office during the pandemic and the implications for a time after the crisis

Who will bear the brunt of Lockdown Policies? Evidence from teleworkability measures across countries

The impact of COVID-19 on gender inequality in the labor market and gender

The Privilege of Working From Home at the Time of Social Distancing

Topic

Table 3 Overview of more comprehensive researches, Part 3(4) (own depiction)

07/2020

07/2020

07/2020

06/2020

Publish date

Metaanlysis home office access and inequality in access

Cross-sectional telework and its perceived career consequences in general included/ with focus on existing inequality by age, education, gender, born abroad, job stability, and firm size in relation to telework access

Cross-sectional telework and its perceived career consequences with focus on existing inequality in relation to telework access by gender

Cross-sectional telework and its perceived career consequences with focus on existing inequality in relation to telework access by income

Type of research and parameter

(continued)

BIBB/BAuA 2018 sample: 17,000 employees of Employment Survey included own calculation

O-NET Survey 2020 sample: 40,000 businesses and 170,000 employees PIAAC-Survey 2015: 120,000 employees

May-June 2020 sample: 5008 employees from USA, Germany, Singapore

0-Net Survey 2020 sample: 40,000 businesses and 170,000 employees; ICP Survey: 16,000 employees

Proband number and data base

570 K. Zöllner and R. Sulíková

Country

Italy

Researcher

Bonacini, L. et al.

Table 3 (continued)

Working from home and income inequality: risks of a ‘new normal’ with COVID-19

Topic 07/2020

Publish date Cross-sectional/ home office potential quantitative and qualitative working with focus on existing inequality by gender, age, income, education in relation to telework access

Type of research and parameter

INAP PLUS Survey 2018 sample: 45,000 employees INAP ICP Survey 2013: 16,000 employees

Proband number and data base

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K. Zöllner and R. Sulíková

Table 4 Overview of more comprehensive researches, Part 4(4) (own depiction) Researcher

Country

Topic

Publish date Type of research and parameter

Proband number and data base

Blom, A. G. Germany The Mannheim 07/2020 et al. University Corona study: Mannheim focus report on the use and acceptance of home offices in Germany during the Corona lockdown

Longitudinal study/ home office potential quantitative and qualitative working with focus on existing inequality by gender, income, education, age in relation to access to telework

German Internet Panels GIP 01/03/04/ 2020 sample: 3600 Employees

Lyttelton, T. et al.

Cross-sectional home office potential quantitative and qualitative working with focus on existing inequality in telework access by gender

ATS panel 2003–2018 sample: 19,179; 2020 sampe: 784

USA

Gender 08/2020 Differences in Telecommuting and Implications for Inequality at Home and Work

SUM Probands: 2,491,259

3.3 Inequality Accessing Home Office Prior Time of COVID-19 Pandemic Social inequality relating teleworking access are existent and considered as followed in prior COVID-19 time. Measurements of Lott and Abendroth indicated differences in gender [31]. 14% of workers were not allowed working from home, but technically feasible, of which 11.86% are men and 22.01% women. Differentiated research based on the representative Employment Survey with 20,000 participants evaluated that people do jobs with a high intensity of cognitive activities in large companies with more than 250 employees, the chance that they will have access to the home office increases significantly compared to people who do it to a high degree engage in cognitive activities in small businesses. Possible justification for this connection is that small businesses have a familiar business culture that comprised greater trust in employees. These companies are certain that

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their employees do their work in the home office without direct supervision. The average likelihood of employees who perform more extent of cognitive activities and more available by higher education, having access to the home office with amount of 14.9% higher average than for employees who do not or only rarely do have. People having developing, researching or designing facilities in their work, have an 8.5% higher probability of accessing home office [33]. Grunau et al. resumed that home office is most prevalent among higher and highly qualified civil servants with and without managerial roles. The biggest gap between possible and actual work from home existed among the qualified employees. 8% of sampled “qualified workers” worked from home, while 58% of them could not despite of their wishes and existing possibility. Managers or supervisors often work at home in addition to their actual work perceived attendance time, which generates more stress. Finalizing working from home mean a move away from being present in the company with an extension of working hours having the highest share of overtime at almost 50%, which is only partially or not compensated for [20]. Literature review of 50 articles published between 1998 and 2007 by Kanellopoulos cleared out that workers are more allowed to telework, which are high educated. Professional status influences workers’ opportunity to participate fixed site telework. He realized that also gender inequality has been raised [26]. Sample size did not been mentioned as well as relative statistic data as a basis of comparation models lacks. Wulff-Pabilonia and Vernon evaluated by a sample of 8055 American participants within 2017–2018 that teleworking access depends widely on education, age, race and ethnicity, foreignborn status, metropolitan residence, hourly pay status, flexible hours schedule status, union member status, government worker status, industry and occupation, but not by gender. Mean wages are higher for teleworkers than for office workers. Male teleworkers earn more, precisely 82% of wage premium of female home office worker, than male office workers. Woman in home office earn 39% of wage premium of female home office worker more than female office worker. Higher education significantly increases the probability of being an occasional teleworker [30]. Men having a college degree or graduate degree compared to no college experience, the probability of being an occasional teleworker increases by 6–8% on average. In contrast to women having some college degree the probability of being an occasional teleworker increases by 5%, instead having a graduate degree increases the probability of being an occasional teleworker by 7–9%. Regarding age, women’s probability of being an occasional teleworker is higher for middle-aged than for younger and older female workers. According ethnicity, non-Hispanic black females are 2% more likely to be home-based teleworkers than non-Hispanic white females [44].

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3.4 Inequality Accessing Home Office Within the Time Frame of COVID-19 Pandemic Blom et al. evaluated by the longitudinal Mannheimer study data of 3600 German probands from German Internet Panel within the COVID-19 Pandemic that COVID19 Pandemic effects home office work in quantitative and qualitative scope and realized existing inequality by gender, income, education level and age in a very precise scale. Applicating a precise methodology while using daily surveys which are continuously updated, they have analysed data from January 2020, before outbreak of virus and following restrictions within the crisis of COVID-19 from the beginning of March 2020. 50% of German employees still worked for their employers on site under the Corona restrictions and 25% worked in the home office. This is a significant increase compared to pre-Corona times, which were measured with 12% of employed people in Germany in January 2020 by German Federal Statistical Office. Considering gender influence, before crisis more men than women were at least occasionally working from home. 22.5% men and 15.5% women. During the Corona lockdown, the differences between men and women using home office were vanishing. The share of men working from home were measured only around with 3% higher than the share of women. Differences by education and income are more significant. More people with a high level of education and good earnings work in the home office, people with lower educational qualifications are affected by time off work and short-time work. 44% of people with a university degree work in the home office, for people with a secondary school degree, the proportion is just 10%. Respondents who worked at home in January 2020 had the largest proportion of home office during the Corona Pandemic with almost 70% in March. The majority of respondents, who expressed a desire to work from home, worked exclusively at workplace in January, 57% of them work at workplace in March 2020, in June 2020 more than 61% of them exclusively worked at workplace and 17% partly at workplace and partly in the home office. The respondents, who do not want to work from home, are also the group that most frequently continue to work exclusively at workplace. In July 2020, more than 70% of this group was again working exclusively at workplace and almost 10% partly at workplace and partly in the home office. The data could suggest that even during the Corona contact restrictions, it is easier to realize a preference for working at workplace than the desire to work from home. At the end of March 25% of employees worked completely in the home office, in May only 7% are now exclusively in the home office, 22% work partly at home and partly at workplace. Social inequality when using home office related to education level was evaluated. In time of the lockdown, 60% of those with high school diplomas were working from home, but only 15% of those with middle school diploma and 10,6% with low level education. Among persons with a net income of more than 2,500 Euro (and thereby belonging to the top 25% income earners in Germany), about 40% worked from home in March, contrasting 19.3% with income of 1,000–2,500 Euro and 11.6% of less than 1000 Euro. Short time working and job loss particularly affect more people with low incomes and jobs in the hospitality industry and in the

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arts and culture. The risks of the Corona Pandemic are unevenly distributed. Lower income groups are likely to be at greater risk of infection with the Corona virus due to their work at workplace, while at the same time they are affected earlier by the negative economic effects of the Corona Pandemic. The negative consequences of the coronavirus lockdown increased existing social inequalities along two dimensions. The lower educated either loosed their job or experienced partial income loss on short-time work or if they are able to keep their jobs, they have to work in office facing higher infection risks [10]. Results of Deng et al. about 6.8 million Canadians working from home in March 2020, 4.8 million of them did not usually worked from home before. Deng’s research team analysed gender and education differences, where women are more likely than men to work from home and are more vulnerable towards job or income loss due to the pandemic [17]. In May 2020 men saw a greater rebound in employment than women measured by the Labour Force Survey with a sample size of 5,000,000 participants. 58.4% of telecommuters both sexes have bachelor’s degree or higher. Bachelor degreed women occupied with 60.7% and bachelor degreed male 59.2% work from home related to college degree women to male with 46.5% to 31.6%. This provides further evidence that working from home is more feasible for workers employed in professional or managerial occupations, which typically required higher levels of education. Instead, women workers were disproportionately impacted by pandemic related unemployment and loss of hours (CCPA = California Consumer Privacy Act), because of being occupied in sectors, including health care and social assistance, educational services, accommodation and food services while men saw a greater rebound in employment than women [25, 36]. Financially vulnerable workers appear to have the lowest telework capacities, including those who are under the age of 25 with proportion 21% and who have a high school diploma are measured with 25% or less than a high school diploma with 13% [17]. The analysis did not give a precise overview in comparison to year and categories. The author signalizes that the pandemic would widen the still existing gap between workers. It is not clear in which differential proportion the crisis intensifies the inequality by gender, education level and age. Data of American population collected by Lytellton et al. in 2020 before and during the COVID-19 crisis underlined that telecommuters have unequal access dependent on sex, ethnicity and educational level. Teleworkers have higher socioeconomic status than workers in other working arrangements and are indicated by higher earnings, higher shares in professional and management jobs and higher education. Telecommuters are workers, who mostly are older and white collard and are more likely to work longer hours. Comparing to Pandemic time telecommuting women are college educated by similar number than before Pandemic. Although the proportion of respondents in professional jobs is higher during Covid-19. The proportions of respondents in high status jobs are also similar across samples. The largest differences between the samples are in racial composition. Telecommuters more racially and ethnically diverse within pandemic than before crisis. Data cleared out gender inequality to home office access with evidence. Men indicate greater differences between the samples. While similar in terms of educational attainments,

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the percentage of telecommuting men with professional or management jobs is higher before pandemic. Telecommuting men of the ATUS sample (before COVID19 Pandemic) also work longer hours and have fewer and older children than their CIS sample (within COVID-19 Pandemic) coparts. Similarity according time frame is obvious by racially diversity [33]. Adams-Prassl et al. collected data from USA, U.K. and Germany in 2020. In the USA and UK were found a large gender gap in respondents’ ability to work from home. In the US (UK), women on average report they can do 42% (41%) of their tasks from home, compared to 53% (46%) for men. In contrast, in Germany they found no significant difference: men report that 41% of their tasks can be done from home and women reported about 39% [1]. The COVID-19 crisis has had large impacts on the economy indicating inequality to individuals. Belzunegui-Eraso and Erro-Garces analysed a sample of 14,300 workers between March 1–16 th and indicated that men had a higher likelihood of working at home, but women were more likely to work at home intensively. Other variables that increased the probability of working at home were higher education levels, tenure, and the use of computers. Scientists did not differentiate inequalities in pre and within Pandemic time frame. In EU-25 countries plus the remaining countries Bulgaria, Romania, Switzerland and the United States it was found that women were less likely to telework from home respectively mobile location than men. Gender and additionally higher education levels, tenure, and the use of computers, increased the probability of working at home [8]. The work of Brussevich et al. in the USA cleared out that 15% of 97,3 million workers are at high risk of layoffs and furlough across the countries. Workers least likely to work remotely are young, without a college education, working for nonstandard contracts, employed in smaller firms, and those at the bottom of the earnings distribution. They suggested that the pandemic could exacerbate inequality. Cross countries heterogeneity in the ability to work remotely reflects differential access to and use of technology, sectoral mix, and labour market selection. Workers in emerging market economies are likely to face significant challenges during strict lockdowns given limited access to technology [13]. A conducted survey between May and June 2020 with 5008 respondents from Germany, USA and Singapore in contrast to previous crisis, COVID-19 has had a larger impact on industries with high proportions of female employment. Moreover, school- and daycare closures increased caregiving responsibilities. These changes increased the burden on women more than on men and in general found differential impact on men and women. Women in the labor market are more severely affected than men as they are more likely to work from home, reduce working hours, and become unemployed. Women have a 7% higher likelihood of having experienced a transition working from home, but contrasting a 5% higher likelihood of having reduced their weekly hours by more than 10, and had a 3% higher likelihood of having transitioned to unemployment since January 2020. In particular, the differences in unemployment probabilities are largely due to women’s pre-COVID employment situation, as they were higher likelihood of working part-time [40], as considered in Fig. 5.

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Fig. 5 COVID-related changes in labor market outcomes [40], Notes: 95% confidence intervals, survey weights used, N = 2589, p < 0.05, p < 0.01, p < 0.001, Correction: Reduction of hours < 10

Data of more than 4000 employees surveyed in Wales and England indicated that the COVID-19 Pandemic released working inequalities divided by income, age, gender and ethnicity and exacerbated already existing inequalities. Employees with higher levels of education and higher earnings are more likely to be able to carry out their work activities from their home. Education is likely to be especially protective also of the jobs of younger workers. 50% of parents work outside their home having the lowest education group, while this proportion drops to 25% for mothers and 19% for fathers with university-education. They also found that men and African American workers are less amenable to home working [11]. Scientist of Harvard University affirmed according data of the Washington-based Economic Policy Institute, that less than 30% of US workers can actually work from home, a statistic that differs enormously by race and ethnicity. Hispanics and Latinos in the country are the group least likely to be able to work from home, only 16% can, while Asian-Americans have the highest proportion of remote work with 37%, followed by fair skinned Americans with 29.9%. African Americans are the group with the second lowest remote-work rate numbered by 19.7%. Naumann resumed that COVID-19 magnifies the growth of inequality as long as there is no vaccine, or in case of other pandemics, it might lead to a permanent increase of these inequalities [37]. Regarding Fig. 6, related to PIAAC survey by International Monetary Fund (international survey conducted in over 40 countries/economies), results revealed that inequality by age, gender and education accessing work from home is intergenerational. Non-educated youth is the most affected by inequality accessing telework especially within crisis [13], as displayed in Fig. 6: Income inequality was analysed by Cetrulo [14]. Quantitative distribution of median Italian wages for office work and home-office work were analysed under COVID-19 pandemic, first wave. Office work is largely concentrated in the income range of e500–1800 per month, contrasted by working from home occupations with

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Fig. 6 Crisis could amplify intergenerational inequality, Non-college-educated youth are the most vulnerable, Tele-workability index by age group and education level, abscissa:age, ordinate: teleworkability-index, [13]

median wages by range of e1000–2000 per month. In sum, COVID-19 magnifies the growth of inequality to all mediating categories. Papanikolaou and Schmidt analyzed remote employment in the USA under exposure of COVID-19. They worked out the relation that workers in occupations cannot work remotely are significantly more likely to have lost their employment status in 2020. They analysed data of 23,984 US employees of the CPS survey and resulted for the time of March 2019 compared to February and April 2020 an increase of 9.2% in the likelihood of non-employment for workers at the bottom quartile of the earning distribution compared to a 1.6% increase for workers in the top quartile. Remote work is privileged for workers with high income. Workers most adversely affected by work disruptions and more often are not accessed to telework due to Covid-19 are female workers with young children and without a college degree. This group indicated, including a one standard deviation, that an increase in Covid-19 work exposure was associated with an 15% increase in non-employment, which is three times higher than the average response among all workers [38]. The teleworking research of Alipour et al. discovered a gap concerned the level of education and income. Comparing to employees without an academic degree, university graduates are almost twice as likely to have the opportunity to work from home. They diagnosed a large number of employees experienced in working at home accompanied by an unused home office potential of employees without a university degree before the crisis. Inequality is also reflected in different income levels of employees with and without home office-enabled jobs. 54% of working places are places in home office pandemic related contrasted to 13% in general as principal workplace in home office. Employees with a university degree having a proportion

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of 60–67% working home pandemic related. Merely 50% home office work were used within Pandemic [3]. Bonacini et al. results show that increase in home office feasibility realized income inequality among employees, in particular with advantage to males, older and graduates respectively high-paid employees. A sample of 61,000 Italian employees of two different sample panels displayed that a slight growth of work from home feasibility is linked to an 1% increase on the mean labour income. By a swapping of 10% share of employees from the low feasibility level to the high would be associated with an increase of the mean labour income up to e 259 and the Gini index for about 0.004 points. Estimations by RIF (Recentered Influence Function) regression model author’s conclusion revealed that home office risks to exacerbate pre-existing inequalities in the labour market [12]. Elaboration of all relevant research which are listed in Tables 1, 2, 3 and 4 lead to the affirmation of the hypothesis 2 stating that the scope of inequality accessing telecommuting has increasing since the beginning of the COVID-19 crisis.

4 Discussion Research results approximately mark the same trend. The COVID-19 Pandemic let increase the scope of telework and exacerbate inequality related to telework access revealed by data from worldwide countries such as USA, U.K. and Europe with Italy, Spain and Germany. Evidently the scope of telework increased by nearly 20% released of the COVID-19 pandemic in Germany according Statista [42] and Fraunhofer Institute [23]. In the USA more than 50% of the workforce uses home office, affirmed before crisis by 7% of participants and within crisis by 72%. Reflecting authors’ study conditions, such as sample size, time frame of data collection, selection criteria of participants, data base (external or internal), country and date are different, which is demonstrated in Tables 1, 2, 3 and 4, the results could not precisely be compared to each other. Exclusively, Reichelt et al. [40] and Adams-Prassl [1], investigated data from 2 to 3 countries and could reflect nation/governmental requirements and preparedness to crisis. Adams-Prassl [1] cleared out gender differences related to home office access are of higher extent in the USA than in the U.K. Age and education gaps related to home office access are similar comparing U.K. and the USA. The U.K. shows a large increase of worker tasks’ share which could be done from home, while the USA show no systematic evidence in changes. The research of Blom et al. [10] and Adams-Prassl [1] constructed and analyzed sample over long time, able to demonstrate the incisional impact of the pandemic and gained reproducible results of longitudinal study construction. Worth mentioned, the Mannheimer Corona Study (MCS) by Blom et al. [10] in the first phase of pandemic data from around 3600 participants of the German Internet Panel (GIP) were collected. Participants were asked every week from March 20 to July 10, 2020, about how their lives have changed since the Corona crisis. They

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examined social and economic aspects e.g., childcare, work situations and disposable income as well as the influence of political measures on social interactions, fears and the social acceptance of measures to contain the pandemic. The study participants were evenly distributed over the days of the week so that the team of 18 scientists received daily insights into the developments in the population. Data collected of 16 weeks are the basis of the second phase, the basis to carry out detailed data and drew further conclusions about the effects of the pandemic in Germany. The MCS panel study built on an existing long-term study, could compare the developments of the social situation before and within the outbreak of the Corona virus. GIP participants have been contributing to the research regularly for at least 18 months, some for 8 years. Integrating the MCS into the ongoing data collection of the GIP, the third phase of the study can also investigate the long-term consequences of the Corona Pandemic for Germany. The Germany-wide random sample of the GIP, from the registers of the residents’ registration offices, and the two-stage weighting procedure allowed the MCS drawing conclusions about the general population in Germany. Unlike many short-term studies that rely on commercial online respondent pools, the representativeness of the MCS is therefore statistically supported. 12 of 14 researches give statements that home office access inequality are exacerbated by the COVID-19 Pandemic. All the researchers realized that no country ever assumed such a pervasive crisis will occur and therefore do not have any emergency plans, neither in health system nor in economic and labour market.

5 Conclusions The present article analysed the current literature related to the “Topic teleworking and influence of inequality on workers’ well-being” regarding the current hardship of the sudden pandemic. The new experience working from home with more extent or for the first time provide a new situation. Regarding workers’ saturation and satisfaction of this work type related to the change in extent and scope of inequality, a clarification and support for employers are given to reflect their Human Resource Management structures. Understanding the correlations and needs of employees under crisis, employers could imagine about improvements. Employers will get a stimulus to reflect about their workforce under new market conditions and could help them constructing a supportive and controlled work environment. Considering the natural relations of home office intensity and job satisfaction [19] including the effects of psychological mediators [18] employers realize the importance preserving and optimizing workforce. Blom et al. results deliver the incentive to compensate inequal access of teleworking applying to a new job structure with a safe office workplace or additional payment, companies could hardly fail to preserve Human Resources and its productivity [10].

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Processing the following coherence findings of the OECD [16], researchers and practioners are able to elaborate and implement new COVID-19 adequate structures into the managerial departments and workplace. Upgrading let increase the probability for employees having higher job satisfaction and efficient work environment. The attention of a good protection from virus must be developed as a standard, because protection is the assurance against absenteeism maybe for a long time in fact of COVID-19. Businesses around the world have to be restructured for the future or could disappear due to the pandemic. Retrained employees prevent them from loosing their jobs and management have to consider how precious their employees are. Employers are dependent on them and not alone on their investors and shareholders. Companies surely interested in finding new ways to brave the crisis. Hygiene rules at workplace in new workplace models, e.g., rotation between home office and office work and/or combined with co-working spaces are potential possibilities [24]. Connecting previous research results with new conditions generated by the crisis will open new niches for researchers and companies. Tables 5 and 6 shows the results about the changes of scope in home office use and inequality accessing home office work. The crisis requires new advanced methods to reach more robust and adapted results and conclusions. For instance, more cross sectional and longitudinal data provide to define causation between previous researches and the new situation. The need is to reveal mechanisms, crisis dependent dimensions and limitations. Additionally, it would be useful to conduct nationwide more diary studies which will allow us to capture a person change on levels of well-being, as opposed to a cumulative group change. An advantage of this method is that it decreases retrospective bias, which often threatens the validity of cross-sectional surveys. These correlations should lead to a new research ground. The OECD (2020) summarized following coherences, which could help to give a guideline for companies and provide researchers with new ideas for studies [16]: • widespread telework may remain a permanent feature of the future working environment, catalysed by the experiences made with teleworking during the COVID-19 crisis • the use of telework before the crisis varied substantially across countries, sectors, occupations and firms, which suggests a large scope for policies to contribute to the spread of teleworking • while more widespread telework in the longer-run has the potential to improve productivity and a range of other economic and social indicators (worker wellbeing, gender equality, regional inequalities, housing, emissions), its overall impact is ambiguous and carries risks especially for innovation and worker • to minimize the risks of more widespread teleworking harming long-term innovation and decreasing worker well-being, policy makers should assure that teleworking remains a choice and is not ‘overdone’; co-operation among social partners may be key to address concerns, e.g., of ‘hidden overtime’.

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Table 5 Results related to inequality accessing home office, Part 1(2) (own depiction) Author

Country of data collection

Year of publishing data/ year of collecting data

Inequality accessing home office by criteria

Adams-Prassl, A. et al.

USA, UK

04/2020 04-05/2020

Inequality by Evidence of gender in favor exacerbation of men and education level in favor to higher level

Mergener, A.

Germany

04/2020 2018

Inequality by education in favor of higher education and intensity of cognitive activites

Blundell. R. et al.

UK

05/2020 1991–2019

Inequality by Evidence of income, gender exacerbation and ethnicity compared to prior COVID-19 Pandemie existing inequalities

Wulff Pablionia, S. USA and Vemon, V.

05/2020 2017–2018

Inequality by education, gender, age, ethnicity and income

Belzunegui-Eraso, A. and Erro-Garces, A.

05/2020 Inequality by 1–16 March 2020 education and gender

Spain

COVID-19 crisis exacerbates inequality

Assumption of exacerbation

Papanikolaou , D. USA and Schmidt, L. D. W.

06/2020 03/2020

Inequality by income, education and gender

Exacerbation of existing inequalities

National Union of Canada Public and General Employees Canada Deng, D., Messacar, Z. and Mori-sette, R.

06/2020 2019/ 05/2020

Inequality by Exacerbation of gender, existing education level inequalities and age

Cetrulo, A. et al.

Italy

06/2020 2016

Inequality by income

Exacerbation of existing inequalities

Reichelt, M., Makovi, K., and Sargsyan. A.

USA, Germany, Singapore

07/2020 05–06/2020

Inequality by gender

Exacerbation of existing inequalities

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Table 6 Results related to inequality accessing home office, Part 2(2) (own depiction) Author

Country of data collection

Year of publishing data/ year of collecting data

Inequality accessing home office by criteria

COVID-19 crisis exacerbates inequality

International Monetary Fund/Brussewich, M, Dabla-Norris, E. and Salma, K.

USA

07/2020 2015 2020

Inequality by age, education, income

Exacerbation of existing inequalities

Alipour, J. V. et al. Germany

07/2020 2018

Inequality by education and income

Exacerbation of existing inequalities

Bonacini, L. et al.

Italy

07/2020 2018 2013

Inequality by age, income, education

Exacerbation of existing inequalities

Blom, A. G. et al. University Mannheim

Germany

07/2020 01/03/04/2020

Inequality by gender, income, education, age

Exacerbation of existing inequalities

Lyttelton, T. et al.

USA

08/2020 2003–2018 2020

Inequality by gender, ethnicity and educational level

Exacerbation of existing inequalities

• to improve the gains from more widespread teleworking for productivity and innovation, policy makers can promote the diffusion of managerial best practices, self-management and ICT skills, investments in home offices, and fast and reliable broadband across the country.

References 1. Adams-Prassl, A., Boneva, T., Golin, M., Rauh, C.: Inequality in the Impact of the Coronavirus Shock: Evidence from Real Time Surveys. IZA Discussion Papers Series, Bonn (2020) 2. Ahrendt, D., Mascherini, M.: Living, Working and COVID-19: First Findings—April 2020. Eurofound Publications Office of the European Union, Dublin (2020) 3. Alipour, J.V., Falck, O., Schüller, S.: Working from Home during the Pandemic and the PostCrisis Implications. Ifo Schnelldienst, München (2020) 4. Baert, S., Lippens, L., Moens, M., Sterkens, P., Weytjens, J.: How Do We Think the COVID-19 Crisis Will Affect Our Careers (If Any Remain)? GLO, Kent (2020) 5. Baert, S., Lippens, L., Moens, M., Sterkens, P., Weytjens, J.: The COVID-19 Crisis and Telework: A Research Survey on Experiences, Expectations and Hopes. GLO, Kent (2020) 6. Bailey, D.E., Kurland, N.B.: A review of telework research: findings, new directions, and lessons for the study of modern work. J. Organ. Behav. 23, 383–400 (2002) 7. Beckfield, J.: Rising inequality is not balanced by intergenerational mobility. Natl. Acad. Sci. 117, 23–25 (2020) 8. Belzunegui, E.A., Erro, G.A.: Teleworking in the Context of the Covid-19 Crisis. Sustainabilty MDPI, Basel (2020)

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9. Berg, J., Bonnet, F., Soares, S.: Working From Home: Estimating the Worldwide Potential. CEPR, London (2020) 10. Blom, A.G., et al.: Mannheimer Corona Study Focus Report on Employment in Germany. University Mannheim, Mannheim (2020) 11. Blundell, R., Costa Dias, M., Joyce, R., Xu, X.: COVID-19 and Inequalities*. Fisc. Stud. 41(2), 291–319 (2020) 12. Bonacini, L., Gallo, G., Scicchitano, S.: Working From Home and Income Inequality: Risks of a ‘New Normal’ with COVID-19. J. Popul. Econ. 34, 303–360 (2020) 13. Brussevich, M., Dabla-Norris, E., Khalid, S.: Who will Bear the Brunt of Lockdown Policies? Evidence from Tele-workability Measures Across Countries. International Monetary Fund, Washington (2020) 14. Cetrulo, A., Guarascio, D., Virgillito, M.E.: The Privilege of Working From Home at the time of social distancing. Intereconomics 50, 142–147 (2020) 15. Charalampous, M., Grant, C.A., Tramontano, C., Michailidis, E.: Systematically reviewing remote e-workers’ well-being at work: a multidimensional approach. Eur. J. Work Organ. Psy. 28, 51–73 (2019) 16. Criscuolo, C., Nicoletti, G., Gal, P., Leidecker, T.: Productivity Gains from Teleworking in the Post COVID-19 Era: How can Public Policies Make it Happen? OECD, Paris (2020) 17. Deng, D., Morisette, R., Messacar, Z.: Inequality in the Feasibility of Working From Home During and After COVID-19. STATCAN COVID-19, Ottawa (2020) 18. Gajendran, R.S., Harrison, D.A.: The Good, the Bad, and The Unknown about telecommuting: meta-analysis of psychological mediators and individual consequences. J. Appl. Psychol. 92, 1524–1541 (2007) 19. Golden, T.D., Veiga, J.F.: The impact of extent of telecommuting on job satisfaction: resolving inconsistent findings. J. Manag. 31, 301–318 (2005) 20. Grunau, P., Steffes, S., Wolter, S.: Home Office in Times of Corona: There are so far Untapped Potential in Many Professions. IAB Forum, Nürnberg (2020) 21. Guimaraes, T., Dallow, P.: Empirically testing the benefits, problems, and success factors for telecommuting programmes. Eur. J. Inf. Syst. 8(1), 40–54 (1999) 22. Hausser, K., Salam, D., Lowery, K., Berard, P.: Ernst & Young LLP Webcast Polling Results Show Telework will Continue Beyond the COVID-19 Emergency. Tax News Update U.S. Edition, London (2020) 23. Hofmann, J., Piele, A., Piele, C.: Working While Corona Pandemic-On the Way to Normal. Fraunhofer-Publica, Stuttgart (2020) 24. Josef, B., Back, A.: Cowork from a business perspective—out of office, into the flow. HMD Business informatics practice 56, 780–794 (2019) 25. Kaczor, S., Kryvinska, N.: It is all about services—fundamentals, drivers, and business models. Soc. Service Sci., J. Service Sci. Res. 5(2), 125–154 (2013) 26. Kanellopoulos, D.N.: How can teleworking be pro-poor. J. Enterp. Inf. Manag. 24, 8–29 (2011) 27. Kuckartz, U.: Qualitative Content Analysis: From Kracauer’s Beginnings to Today’s Challenges. Forum: Qualitative Social Research, vol. 12, 3 (2019) 28. Kuckartz, U.: The Best Choice for your Qualitative & Mixed Methods Analysis.VERBI GmbH, Berlin (2020) 29. Kuckartz, U. (2019). Qualitative text analysis: A systematic approach. In: Kaiser G., Presmeg N. (eds.) Compendium for early career researchers in mathematics education. ICME-13 Monographs. Springer, Cham. https://doi.org/10.1007/978-3-030-15636-7_8 30. Lautsch, B.: Work-life flexibility for whom? Occupational status and work-life inequality in upper, middle, and lower level jobs. Acad. Manage. Ann. 12 (2017) 31. Lorenzo, M., Curtarelli, M.: Home-based TELEWORK. Virtual Focal Point meeting- European Agency for Safety and Health at Work, Bilbao (2020) 32. Lott, Y., Abendroth, A.: Reasons for not working from home in an ideal worker culture: why women perceive more cultural barriers. Work and Study International (WSI) 211 (2019) 33. Lyttelton, T., Zang, E., Musick, K.: Gender Differences in Telecommuting and Implications for Inequality at Home and Work. SSRN Elsevier, New York (2018)

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Building Online Stores Using PHP Daniel Pietrasik, Loretta Pinke , Peter Veselý , and Oskar Karlík

Abstract This article discusses the basics of an ideal e-commerce solution for a company that would like to use its website as the main source of sales. The goal of this work is to analyze other websites, to define which sections the website should contain and what layout it should have in order to facilitate customer orientation and thus support sales. The work explains to readers the basic theoretical knowledge with the help of domestic and foreign experts, and it also presents ISO standards, the Data Protection Act (GDPR), VAT in the European Union, and more. After recommendations on what the e-commerce website should look like, it continues with the limitations of the work and the conclusion.

1 Introduction Online stores are one of the fastest-growing marketing elements created by companies. The dynamic development of the online shopping market means that more and more companies are making their products available electronically, often giving up traditional ways of selling. A well-designed sales and management system enable entrepreneurs to do business efficiently, thereby reducing the costs that the owner has to bear to maintain the shop [1]. D. Pietrasik (B) ˙ Institute of Informatics, Lodz University of Technology, Stefana Zeromskiego 116, 90-924 Łód´z, Poland e-mail: [email protected] L. Pinke · P. Veselý · O. Karlík Faculty of Management, Comenius University, Odbojárov 10, 831 04 Bratislava, Nové Mesto, Slovakia e-mail: [email protected] P. Veselý e-mail: [email protected] O. Karlík e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_21

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Your website is not only a good way for a company to make alternative earnings but also an ideal way for additional, low-cost advertising of the company’s brand, products, or services. Maintaining a functioning online store is much less expensive than maintaining a traditional store, for which you often have to pay high fees and additionally employ numerous staff, which will be necessary to maintain Order and proper relations with customers. The electronic route has made it possible to limit the staff to just a few people and to reduce the costs associated with keeping the expensive premises in a good place. It should also be noted that access to online shops is possible from virtually anywhere in the world where internet access is available. Sales are not limited to the place of residence or the area where the store is located, but the products are made available on a much larger scale. Unfortunately, a good online store app is a challenge for anyone who likes and can create software. Given that writing web applications is significantly different from traditional programming. Many programmers who want to create their own online store make a lot of mistakes that reduce or prevent the chance of a successful project from the outset [1]. In the following thesis, it was decided to solve this problem by indicating how the online store should be designed, what should be paid attention to and what must not be forgotten, and on the contrary, can be omitted. The main goal of the work is to analyze the possibilities of creating online stores using HTML5, CSS3 technology [2]. The analysis carried out forms the basis for the creation of the author’s project of the online store. The first chapter of the work discusses the most important rules for creating online stores. It describes how to design online stores, what to pay special attention to, what mistakes to avoid, and what a potential customer expects, who would like to purchase a specific product, and what the person who will manage the store expects. Then, in the second chapter on the basics of the previously discussed rules, several selected, existing online stores were analyzed, after which their advantages and disadvantages were identified. Chapter three presents a technical description of the created project. Describes the functionality of the created store, the principle of its operation, indicating the pros and cons of the proposed solution. The final chapter summarizes the work. They compared the analyzed online stores with the author’s design and answered the question of whether PHP combined with the latest HTML5 and CSS3 technologies is still suitable for creating online stores [3].

2 Rules for Creating Online Stores The following chapter discusses the most important rules for creating online stores. It describes the rules on how to design online stores, what to pay special attention to, and what mistakes to avoid.

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2.1 Advanced Forms I guess it will not throw an error if it is written that the forms perform one of the most important roles in any online store. Using the forms, the customer of the store has the opportunity to place an order, contact a representative of the company, agree on the place and date of shipment, or increase the number of purchased products. Forms allow easy and quick contact between the buyer and the seller. So, it’s a good idea to pay attention to them by designing individual input fields. One of the most important elements of forms is the validation of their data [4]. Form validation is simply checking the content of the entered data for the correctness of the information in it. This is done to avoid the incorrectness that a user can enter into the store database. Entering incorrect data often doesn’t have to be a deliberate procedure. In most cases, the user simply unknowingly makes a mistake. The most common case is entering inappropriate data to the wrong field on the form. Such a failure may result, for example, in the entry of personal data in place of a postal address. If the system works automatically and does not have a data validator, it will not notice mistakes. The e-mail sent by the system will not reach the registered user and will not allow them, for example, to activate an account in the store. HTML5 comes to the rescue here. With the entry of the latest version of HTML, you can take advantage of as many as thirteen different built-in object definitions. Thanks to them, you do not have to write independently, often complicated validation functions, but benefit from ready-made modules. Unfortunately, one important detail must also be remembered. If you want to use HTML5 [5], you need to stock up on the latest browsers that support these standards. On older browsers, the features discussed above will not be recognized and will not function properly. If we want the created Page to work on all browsers, it remains only to write the appropriate validation functions, which before submitting the completed form will check the correctness of the entered data and inform the user about possible errors. Data validation is not only a guarantee of the correctness of the information entered but also increased security of the website [1, 4]. The content of the forms is processed by the server, so there is a high probability that when previously crafted data is transferred to the form, the code entered in the unverified form can lead to a violation of the security of the store [6]. Given validation limits the potential for a burglar. In every possible form field, you must use patterns to check the data you type. For example, if you want a zip code to be entered by a user, you must use a tool that prevents you from entering characters other than those expected of you, while specifying the Order and quantity of characters. Each field in the form must be character-constrained. Do not allow the burglar to operate freely. Another aspect of being addressed is the simplicity and intuitiveness of the forms. Using advanced forms, the user often has to enter a lot of data, which may discourage him from continuing to use the service. The forms and the data contained therein must be presented in a transparent and user-readable manner. Filling in more fields in forms must have a specific order. When choosing a sample product, you need to have a selection of its quantity next to it. It is a bad habit to spread different information

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Fig. 1 Part of an order form that has been incorrectly designed

about one product on the whole side. The user should have a specific and targeted order in which the form fields are filled in. Failure to comply with a particular order may result in incorrect filling in the form. The first figure shows an incorrect way to place individual form fields. The second figure shows the same form but presented in a user-friendly and intuitive way (Figs. 1 and 2). In the first figure, the fields of the form placed in the online store are arranged without a specific order, without hierarchy. The following passage selects dozens of different fields whose Order of discharge is not logically defined. A user who would like to try to fill out such a form could make many mistakes that the designer did not anticipate. Such a form is not clear and unreadable for the user. Besides that, the amount of data presented in such a form is very limited in the available space. In the figure shown, there is a small amount of data compared to those seen in the second figure. The form in the second figure is highly transparent and has a friendly graphical interface. The individual elements are separated from each other, so the user does not have to wonder which element belongs to the given form. Additionally, each form is divided into appropriate categories, such as a month or product type, so that the user does not have to look for the information needed, only selects the appropriate tab. This type of form will gain more followers than the form shown in the first figure. The last important principle of form design is their speed and failure-free operation [1, 4]. At a time when there is a lot of information to be given in the formula, the probability of making a mistake is high. The more information is required of a user, the more often they make a mistake. The system designed must counteract such situations. The user should input as little data as possible directly from the keyboard, thus using the form fields already built into the system. You won’t make as many

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Fig. 2 Order form designed correctly

mistakes if you have to select a value from a specific pool than you would type it from the keyboard. Whenever possible, you should be able to select a value rather than type it manually. The form should additionally remember the data entered. Once the user has accessed the rest of the form and it appears that the previously filled data is incorrect, the system should allow the previously stored data to be corrected without forcing the user to re-enter it. The amount of information that a user must enter significantly affects the rating of a page [7]. Do not require the user to enter data that the application does not need. Storing these values not only increases the amount of information you need to save to the database but also negatively affects your store’s rating. It is also worth mentioning the aspect of automatic data validation. The values entered by the user should be automatically checked for the correctness of the entered data. The user will find the error more quickly if it is immediately indicated and described to him, rather than he will have to find it himself. It’s a good idea to

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accurately describe the type of error and indicate its location at the time of entering the data, not just when you submitted the form. When a form has dozens of fields to fill in, the system must be designed so that it can already save some of them [8].

2.2 Responsive Web Design Responsive web design is a way of designing websites so that the site spontaneously adapts to the different devices on which it will be viewed. This technology is mainly used to match the Page to the resolution of the display on which it is displayed [9, 10]. Website customizes its appearance to the resolution at which it is currently displayed, making it more readable and user-friendly (Fig. 3). With the development of mobile devices with internet access, such as mobile phones, tablets, smartphones, or notebooks, the development of responsive technologies is becoming more important. The lower the display resolution, the harder it is to browse traditional-designed websites. For online stores, this is a very important parameter. If you want to buy a specific product, you often browse through dozens, not hundreds, of different listings, looking for the offer that appeals most to you. If you wish for a mobile device, it is very tiring to see the store’s offers, which often have to be scrolled both horizontally and vertically. The user, especially the unused one, often quickly gets tired and gives up his search [9, 10]. Thanks to responsive web design technology, you can easily adjust the Page to display only the content of the created store that is most relevant. In small resolutions, items that may cause a page to load freely are not directly relevant when viewing a subpage or are simply page beautifying add-ons [9, 10]. The figure below shows an example of a web page, displayed in a small part, not using responsive web design technology. This Page looks very good on highresolution desktop monitors, and however, when you want to display it in a lowresolution phone, for example, 320 × 480, some difficulties make it difficult to browse the site freely (Fig. 4).

Fig. 3 Example of responsive web design

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Fig. 4 Online store displayed in low resolution, without responsive web design technology implemented

You don’t see the full name of the companies, menus, or objects on the Page. You can only see the empty space that occupies the display unnecessarily. Then the stripes of the Page are caught by the eyes. The amount of information the site wants to provide to the user right from the start is huge. For a user to read the entire content of the store, they must repeatedly scroll to both right and left, up, and down. The Page will show only those items that the user accidentally displays by moving the scroll bars. Watching such a site very quickly discourages you from continuing to work especially if you need to watch a lot of products in this way and try to purchase a few of them. Here comes the aid of responsive technology. Using this technology, you can view and format only the items that will be of most interest to you. This figure represents the same Page as the figure before, but with the responsiveness module implemented (Fig. 5). On this web, where the page responsiveness module is implemented, the elements are adapted to the display. You don’t see any space, and there are no very long page scroll bars that don’t specify a specific store browsing direction. You can see only one scroll bar that directs the user’s gaze to vertical browsing of the Page, without

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Fig. 5 Online store displayed in low resolution, using responsive web design technology

unnecessary horizontal scrolling. This solution is more user-friendly and does not discourage the customer from the created store. The answer to the question of whether it is worth implementing responsive technology into the store you are creating, you need to give yourself. This requires a lot of effort, but it’s getting a bigger audience for your Page. However, if you want to reduce the costs associated with designing the right system, you can check what are the most often used resolutions by users (for example, using the Page: http://ranking. pl/en/rankings/screen-resolutions.html), and then adjust the created service only to selected the most popular resolutions [11]. Finally, it’s worth noting one more important aspect. Using responsive technology, when you view a page in low resolution, you don’t remove any items from it, but it just doesn’t display them, it doesn’t load. This way, at any time, as soon as a developer decides to display an object again, simply change its corresponding property, which can be very helpful in the future.

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2.3 Page Structure The problems discussed in this chapter mainly concern HTML5 but are also directly applicable to other technologies. When creating models, graphic designs mainly pay attention to elements such as creativity, individualism, curiosity or modernity. Graphic designers creating the most varied models of their imaginations. Websites that are intended to serve only to advertise must have the above-mentioned characteristics. However, if you create an online store, the main goal is not an interesting, original advertisement for the company but the sale of products. The user must easily and quickly find the information they are looking for and not think about where they are located. Therefore, when creating a website, you need to stick to certain structures that will make it easier for the user to navigate the created site. Each online store you create should be divided into at least three main sections: [12] • header • the main content of the Page (section) • footer Each of these sections should be adequately segregated and have the elements that characterize it. There should be a header at the top of the store you’re creating. The header is the main navigation element of the Page. It should include items such as your company name, logo, customer contact, and main page menus. If your Page doesn’t have a separate product category browser or product finder, it’s a good idea to include these items in the page header so that they can be easily found by the user. The section is the main content of the Page. The information contained therein should relate specifically to the subpage displayed. Based on the data in this part of the Page, search engines such as Google often classify a site in terms of the value of the information on the Page currently displayed. The main section can be divided into multiple articles. The last element of the Page should be the footer. This is the object that sums up the Page, it’s finishing it. The elements that are in it are most often: contact with the creators, date of creation of the Page, date of the last mode of the fixation, version of the site, help, forum, terms and conditions of the usage of the site or language versions. There is more freedom here than in the header section of the Page. You can put items here that should be easily accessible, and there is no room for them in the main menu. An additional element that is not mentioned in the mandatory is the side content of the Page. These are all kinds of ads, banners, promotions, surveys, elements that the user does not have to pay attention to, because they do not directly affect the site being viewed but are an additional part of it. The use of aside content is optional, but it should be kept on mind that the content of this element may not be taken into account by search engines evaluating the content of the proposed Page [8]. The following figures show examples of a header, section, aside, footer, a sample website divided according to the recommended structure (Figs. 6, 7, 8 and 9).

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Fig. 6 Example of a web page header

Fig. 7 Example of the content of the main website

Fig. 8 Example of side content of a website

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Fig. 9 Example of a website footer

2.4 Positioning Many novice creators of online stores do not realize how valuable their sites are to potential users. When designing a website, you need to remember not only that it looks good but also about the content that will be in it [13]. The value of a given page is evaluated by internet search engines. Each search engine browses all available websites and evaluates their value in terms of information for other users. The higher the score we get, the higher the Page will be on the web search engine. When designing online stores, this is a very important element because it has a very significant impact on how many customers will see our site and will have the opportunity to make purchases. The best way to get the most out of search results for selected keywords is called optimization. Search engine optimization (SEO), or simply positioning, is the most important parameter affecting positioning is the number of users who visit a given website. The more often a page is displayed, the more points its search engine awards [14, 15]. Another important issue is the timeliness of the website. The newer the Page, the higher it is positioned. So, it’s a good idea to add new items to your site frequently and update your site before more important dates. It is also a good practice to allow users to actively use the site. Internet users who will use the forum, comments, surveys, reviews will automatically expand the service while updating it. All forms of active use encourage you to visit the site again to check for up-to-date information and changes. However, the value of a given page is not only the number of its views but also the opinion of other sites. The more links to our website we find on various foreign subpages, the higher the browser will classify us. It is worth noting, however, that the browser mainly values only those redirects that are placed on sites that are valuable to it. If a page has multiple links on insignificant pages that are irrelevant to the search engine, this may result in a deterioration of the position in which it is currently located, or even elimination from the search results. Search engines protect their work by punishing scammers who try to break its algorithms [14, 15]. The above-mentioned factors are in most cases independent of the authors of the site and are based on the opinions of other people. However, there are elements that developer scan influences. One such element is the structure of the code. Each

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subpage of the store you create should be marked (tagged) accordingly so that the search engine has as much information as possible about the Page. The name of the Page, the title, the purpose, the keywords are just a few elements that need to be placed on the Page for the search engine to take it into account. When you create a page, you must write it according to the standards that are currently in place. Use a shared tag, and place the appropriate definitions, concepts, abbreviations in the tags that are adapted to it. A well-written page in terms of programming is already halfway to achieving a high position in search engine results [14, 15]. When you publish a page, it’s also a good idea to pay attention to where you place it and what domain you sign it for. The older the domain, the more valuable it will be to the search engine. You shouldn’t invest in free web servers. Their speed of operation is often unsatisfactory so that the created site will load for a long period, which will negatively affect its evaluation [14, 15]. The issue described above is just the basis of a large topic, which is the positioning of pages. The most important principles to look out for when designing web applications are listed. Keep in mind that each search engine protects its algorithms that evaluate individual pages by changing and updating them from time to time. There is no one-size-fits-all policy that you can use to quickly position your site. The value of the Page is determined by other users if they want to visit it, then certainly, the authors will not have to worry about the position in the search results [10].

2.5 GDPR The General Data Protection Regulation (GDPR) 2016/679 is EU legislation on data protection and privacy in the European Union and the European Economic Area. It also deals with the transfer of personal data outside the EU and the EEA. The Act was formulated in 2016 and its official and mandatory implementation took place on May 25, 2018 [16]. This Act regulates: • protection of the rights of natural persons against unauthorized processing of their personal data, • rights, obligations and responsibilities in the processing of personal data of natural persons, • the status, powers and organization of the Office for Personal Data Protection. The Act further defines personal data in particular data relating to an identified natural person or an identifiable natural person who can be identified directly or indirectly, in particular, based on a generally identifiable identifier. Other identifiers, such as name, surname, identification number, location data, or online an identifier, or based on one or more characteristics or traits that make up its physical identity, physiological identity, genetic identity, mental identity, mental identity, economic identity, cultural identity or social identity.

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At the same time, this regulation shall apply to the processing of personal data carried out wholly or partly by automated means and to the processing of nonautomated means in the case of personal data which form part of an information system or are intended to form part of an information system [16, 17].

2.6 ISO Norms ISO 9001/2015 is defined as an international standard that specifies requirements for a quality management system (QMS). Organizations use this standard to demonstrate the ability to consistently deliver products and services that meet customer requirements. It is based on a planning and control methodology and provides a processoriented approach to documenting and reassessing the structure, responsibilities, and procedures needed to achieve effective quality management in the organization. The ISO 9001 standard deals with the requirements for a quality management system, including information documentation, planning and process determination. It also deals with resource management, including human resources and the work environment of the organization, product implementation, steps from design to delivery and measures, analyses and improves QMS through activities such as internal audits and possible corrective actions. It helps organizations ensure that their customers are constantly receiving high-quality products and services, which in turn will bring many benefits, including satisfied customers, management and employees. Using the standard helps to improve processes and saves costs [18, 19, 20–22]. ISO 27001/2013 is an international standard that is recognized worldwide in managing the risks to the security of the information you own. ISO 27001 certification allows your clients and other stakeholders to demonstrate that you manage the security of your information. ISO 27001/2013 (current version ISO 27001) provides a set of standardized requirements for an information security management system. The standard adopts a process approach to creating, implementing, operating, monitoring, maintaining, and improving your information security management system (ISMS). The advantages of the ISO 27001 standard are the certified protection of your company’s information, which is essential for its successful management and trouble-free operation. Achieving the standard will help your organization manage and protect your valuable data and information. Besides, by obtaining ISO 27001 certification, your organization will be able to gain several other benefits such as trust of customers and stakeholders, secure information exchange. It can provide smaller companies with a competitive advantage, consistency in the provision of a service or product, build a culture of security and thus protect the company, assets, shareholders and directors. ISO 27001 certification is suitable for any company, large or small, in any sector. The standard is particularly appropriate where information protection is critical, such as in the banking, financial, health, public and IT sectors. The standard also applies to organizations that manage large amounts of data, to information on behalf of other organizations, such as data centers and IT outsourcing companies [23–26].

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2.7 Load Balancing Load balancing is defined as the methodical and efficient distribution of network or application traffic across multiple servers in a server farm. Each load balancer sits between client devices and backend servers, receiving and then distributing incoming requests to any available server capable of fulfilling them. A load balancer may be: • A physical device, a virtualized instance running on specialized hardware or a software process • Incorporated into application delivery controllers (ADCs) designed to more broadly improve the performance and security of three-tier web and microservices-based applications, regardless of where they’re hosted [27] • Able to leverage many possible loads balancing algorithms, including roundrobin, server response time and the least connection method to distribute traffic in line with current requirements (Fig. 10) Load balancers detect the health of back-end resources and do not send traffic to servers that are not able to fulfill a request. Regardless of whether it’s hardware or software, or what algorithm(s) it uses, a load balancer disburses traffic to different web servers in the resource pool to ensure that no single server becomes overworked and subsequently unreliable. Load balancers effectively minimize server response time and maximize throughput. Indeed, the role of a load balancer is sometimes likened to that of a traffic cop, as it is meant to systematically route requests to the right locations at any given moment, thereby preventing costly bottlenecks and unforeseen incidents. Load balancers should ultimately deliver the performance and security necessary for sustaining complex IT environments, as well as the intricate workflows occurring within them. Load balancing is the most scalable methodology for handling the multitude of requests from modern multi-application, multi-device workflows. In tandem with

Fig. 10 Explanation of how load balancing system works

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platforms that enable seamless access to the numerous different applications, files and desktops within today’s digital workspaces, load balancing supports a more consistent and dependable end-user experience for employees. So why is load balancing necessary? An ADC with load balancing capabilities helps IT departments ensure scalability and availability of services. Its advanced traffic management functionality can help a business steer requests more efficiently to the correct resources for each end-user. An ADC offers many other functions (for example, encryption, authentication and web application firewalling) that can provide a single point of control for securing, managing and monitoring the many applications and services across environments and ensuring the best end-user experience [28].

2.8 VAT When goods or services are sold (and sent) to a private person in a different member state, the buyer usually pays VAT to the seller. VAT is not paid in the buyer’s country. VAT is not due in the buyer’s country when the value of goods sold doesn’t exceed the distance selling threshold. However, the seller’s annual sales to the buyer’s country may exceed a threshold (that varies by country). This is related to the distance selling rules. When this is the case, the seller must register and obtain a VAT number in the country where the threshold was exceeded. Then the seller has to declare and pay the VAT in that particular country (charge VAT in the buyer’s country) (Fig. 11).

Fig. 11 VAT standard rate in European countries

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Let’s say, a seller in one-member state sells goods directly to VAT-exempt organizations and individuals in another member country. Further, in any 12 consecutive months the aggregate value of goods sold to consumers in that member state is below e100,000 (or the equivalent; this value also depends on the destination country). Thanks to distance sales treatment, sellers can apply the domestic place of supply rules to determine which member state collects VAT. In other words, VAT is charged at the rate applicable in the exporting country. If the value of goods sold to final consumers in a member state exceeds e100,000, the exporting seller must charge VAT at the rate applicable in the importing country. A Polish merchant sells car parts to Germany. In the beginning, the value of the goods the seller sells are below the threshold (e100,000). As a result, the Polish VAT rate is applied (23%), for example, e100 net product price + 23% VAT paid in Poland = e123 in total. At some point in the same fiscal year, the same Polish seller may sell so many products in Germany that the threshold (e100,000) is exceeded. Then the seller has to register for a VAT number in Germany and will now apply the German 19% VAT rate. As a result, the total product price will be e119 = e100 net product price + 19% VAT paid in Germany. Goods imported from non-EU countries are subject to VAT and duties at the rate applicable in the member state to which the goods are imported. Normally VAT is charged at the border, along with customs duty. However, there’s an exception (Low-Value Consignment Relief) in the case of low-value shipments. It has to do with de minimis value: the threshold from which the imported goods are subject to duties. VAT paid on importation is treated as input VAT, the same as VAT on domestic purchases [29].

2.9 Learn More About Creating Online Stores From additional rules that have not yet been mentioned, you can list such elements as readability, spelling and stylistic correctness, the appropriate selection of fonts, and the graphical interface of the entire site. Such elements can be exchanged very much. It was decided not to devote separate chapters to each of them because these are elements very obvious and often dependent on the tastes of each of us. This sub-part focuses more on the functionality of online stores. Every online store should meet as many potential customer expectations as possible. When designing a service, you need to put yourself in place a person who will want to find and buy the right items. It’s a good idea to give the user as many opportunities as possible to search the product database, add detailed product reviews, evaluate them, or comment on other reviews. A satisfied user will be much more likely to visit our service for products of interest to him than a person who will have difficulty navigating the store [14]. At the end of the chapter, it is worth mentioning the terms and conditions of the online store. This is one of the most important and most visited items of any store.

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Before purchasing products, each new customer wants to get as much information as possible about the rules of the respective service. He is interested in such information: cost of shipment, availability of products, lead time, returns or complaints. It’s a good idea to place all this data in a place that’s visible and easily accessible to you. Customers won’t purchase products unless they trust the service. It is worth taking care of in advance credibility of the company [30]. Please note this policy when creating online stores. Only properly designed sites have a chance to succeed. It is up to the designers whether the created site will gain the favor of users or not. Users’ tastes vary depending on the prevailing fashion and customs. When creating a website, you need to adapt it to the largest possible audience we want to reach.

3 Analysis of Selected Online Stores The following chapter analyses several selected online stores based on the principles described in Chap. 1. All analyses took place in October 2012. The appearance and functionality of these pages may have changed as of today. The screens and descriptions here refer to pages that were made available at the addresses provided on the day of testing. For the analysis of selected online stores, the tire sales industry was selected. The pages that were analyzed were the first to be ranked highest in Google’s “tire sales” search results as of October 22, 2012. The evaluation involved three online stores: oponeo.pl, opony.pl and 24opony.pl.

3.1 Characteristics of Selected Industry For companies selling automotive, trucks and bulky tires, online trading is very important. More than half of the tires sold are purchased online. The potential profits from selling tires electronically outweigh the profits from selling tires directly in the store. This is mainly because of the price. Tires sold on the Internet have the same characteristics and parameters as tires sold in an ordinary store but are from a dozen to tens of percent cheaper. Users buy tires directly from the store only when their predecessors have been violently damaged or wear out. Then the customer immediately sweats the new tire so that he can continue driving, and there is no time to look for cheaper counterparts on the net and wait until they are delivered. It is not so important the price then, but the ability to continue driving as soon as possible. When shopping by online stores (e-shops), customers pay special attention to the time of delivery of the ordered product. Online sales, in addition to sales, in which the product is picked up in person, are characterized by a certain waiting time for delivery of the purchased product. The longer this time, the more likely it is that we can count on customer dissatisfaction. Many companies guarantee shipping within

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one day. However, the delivery time of the product depends on the selected product shipment (courier, Polish post, express delivery). None of the well-known analyzed companies is involved in the delivery of products in person. Companies sign an agreement with other specialty shipping corporations (such as DHL or UPS) that reduce the cost of potential shipments. Another thing that tires shop customers take into account is the payment methods available. Many customers do not want to prepay for the purchased goods for fear of losing money or miss-investing them. On the other hand, many companies do not want to send products without buying them in advance. This is a dispute that is difficult to resolve unequivocally. Companies that are thriving, with large tire warehouses, where all situations with customers are most often decided to ship without prepayment resolve unequivocally. Companies that are thriving, with large tire warehouses, where all situations with customers are most often decided to ship without prepayment do not significantly affect the number of unsold tires and the costs associated with missed shipments. Companies are particularly popular, which allow payments using various types of payment cards, thanks to which the customer of the store earns bonuses in the form of points PayPal of several per cents of the costs in the bank. The last thing customers consider when buying tires is the possibility of mounting and disassembling tires in nearby plants. More and more tire sales companies nationwide are signing contracts to work with various tire service companies. Thanks to the agreement, the customer who purchases the tires in the company’s online store can put them on their vehicle at no additional cost or for a smaller fee at one of the nearby outlets, cooperating with the company.

3.2 Analysis of the Oponeo.Pl One of the most popular online shops selling car tires is oponeo.pl (Fig. 12). When you start the home page of the oponeo.pl, one of the first elements that can delight is the legibility of the site and its correctness in terms of graft. The Page does not contain items that would cause it to load freely. The selection of both colors and fonts blends nicely with the graphics and content that is displayed on the Page. The site has been divided into several main sections: the page header, the main part of the Page, the side part of the Page, and the footer of the Page. The header contains, among other things, such elements as the main menu, basic information about products that were previously viewed or selected for purchase, store offers, terms of service and contact with a representative of the company. Placed a movable menu in the header, it blends very nicely with all the content of the Page and allows easy and quick access to the most important elements on the Page (Figs. 13 and 14). In the body of the main Page, there is an additional submenu, which gives the possibility to directly appeal to specific, most important points of the regulations. A product search module is located right next to the submenu. You can search for tires

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Fig. 12 Appearance of the oponeo.pl store

Fig. 13 Page header oponeo.pl

Fig. 14 The main part of the oponeo.pl

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in different categories by knowing the tire sizes or by knowing the model of the car. The search is very pleasant and should not cause anyone a problem. Just below the main section of the Page is the side content of the Page. These are all kinds of links to other elements on the site and numerous advertisements of the company’s products and services (Fig. 15). At the very bottom of the site, there is a footer of the Page, perfectly blends with the rest of the site. In the footer, there are numerous links to various articles located on the site and the ability to go to the company’s stores located in other countries (Fig. 16). After evaluating the aesthetics of the site, you can go to the analysis of its functionality. Many items in the site work dynamically, without overloading the Page. The application correctly appears on the most popular browsers and no significant errors have been noticed. Both the way you search for and buy tires should not cause you any trouble. All products are displayed in a very colorful and eye-pleasing way.

Fig. 15 Side part of the oponeo.pl

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Fig. 16 Page footer oponeo.pl

The location of the price, characteristics of individual tires is very intuitive and does not require searching. The Page also provides an example list of sophisticated tire types. Each sophisticated tire has its own characteristics, and the highest-rated tires are the most promoted. Users of the service have the opportunity to easily and quickly comment on and evaluate purchased products. Each available tire has its own detailed statistics, with comments and ratings. The terms and conditions available on the site are comprehensive and contain all the most important elements that can be sought (delivery method, delivery time, type of shipment, warranty, exchange and returns, insurance of the shipment, advertising them). Also, numerous articles have been placed on the site concerning tire tests, tips and recommendations. There was also the possibility of adding “Buy/Replace/Sell” and an extensive discussion forum. An interesting option can be considered a function that remembers the recently viewed tires and the parameters of the car that you typed. A positive feature was also the possibility of checking the status of the Order already on the website of the store itself, and not directly with the courier (Figs. 17 and 18). The site does not support the latest HTML5 technology and is not responsive. At smaller resolutions, some page elements no longer function properly. Most of the available forms are adequately secured, and filling them out should not cause anyone a problem. Summing up the analysis, oponeo.pl website is designed in a very user-friendly way. It makes it easier for people browsing the site to navigate the store and purchase the products that best meet their expectations. Certainly, many people who want to buy tires electronically will decide to check the offer of this service.

3.3 Analysis of the Opony.Pl The opony.pl at first glance may seem legible and easy to navigate. Store users should have no problem finding the options they’re looking for. The standard menu of the site has been replaced with graphic images, which are readable and very friendly for

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Fig. 17 Selected piece of tires found in the oponeo.pl

Fig. 18 Statistics of the selected tire in the oponeo.pl

the person watching the writing. Each of the images has a brief description and is easily recognizable by the user (Fig. 19). However, after prolonged browsing of the store, the user may feel tired. The font used, along with the background in many places, is inappropriate. It tires the eyes and forces the user’s eyes to work more (Fig. 20).

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Fig. 19 Appearance of the opony.pl store

Fig. 20 The main menu of the opony.pl

This site, like oponeo.pl, has been divided into several main sections: header, nav, section, aside and footer, which should make it easier for the user to find the information they are looking for. Unfortunately, the design of the footer section may not delight many users. Much information is presented in the form of continuous text, which may cause a greater reluctance of the person browsing the site to read the information contained therein it. The figure below shows the footer of the opony.pl (Fig. 21). Users should not find items on the Page that would cause it to load freely. The opony.pl, compared to the oponeo.pl, has been designed statically. The site does

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Fig. 21 Page footer opony.pl

not have many dynamic elements that attract the eye and delight with functionality. However, all available page functionalities work correctly. Just below the main Page, from time to time there are various types of ads, regarding promotions, competitions, products and services of the company. Many users may find it not appropriate to place ads here, as they are too eye-catching for the person browsing the site, but they only side the content of the store. The company offers a wide range of tires in many different categories, but the form of presentation of the available models is inappropriate. The tires found are presented in text form, without photographs or detailed descriptions. A potential store customer can quickly be discouraged from this form of product search, especially when he is not determined to make a specific model, and the individual numbers and codes placed at each item tell him little (Fig. 22). The store displays correctly in both the latest and older browsers. Users should not notice any incorrectness. A detailed evaluation of the products can be considered as a major advantage of the website. After selecting a specific model, users have the opportunity to vote and article evaluation under several categories, such as driving comfort, noise level, abrasion, driving and behavior on different surfaces, external appearance or rolling resistance. Thanks to a detailed evaluation of the purchased product, users can follow the opinions of other customers of the store and better adapt the ordered product to their own needs. The presentation of a single tire can be considered as a disadvantage. Many of the products available in the store do not have photos, tread characteristics and detailed information about the product being sold. Users browsing the store’s resources can quickly discourage them from looking for the desired tire if they encounter several poorly prepared offers. The figure below shows an example of a sophisticated tire model that is an incorrectly prepared store offer. The offer does not have a characteristic photo, a detailed

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Fig. 22 Tire search results in the opony.pl

description, as well as the characteristics of your tread. The assortment presented in this way does not encourage the user to buy (Fig. 23). An interesting solution to the site is the tags like “Super price”. On each overvalued product there is a visible marker that informs the user of the promotion and directs his eyes to the appropriate tire model (Fig. 24).

Fig. 23 Example of tire description in a opony.pl

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Fig. 24 Example of products with special price having “Exclusive price” tag in the opony.pl

The last functionality tested on the site is its terms and conditions. The site has easily accessible terms and conditions, which are divided into many categories. All the most important rules for buying a tire are listed and described clearly to the user. The disadvantage of this functionality is its readability. The rules have a lot of text, which is written in a small font, without proper formatting text here (Fig. 25). Fig. 25 Submenu of opony.pl with easily accessible terms and conditions, divided into several categories

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The site is non-responsive, displaying it at low resolutions does not cause errors. However, it makes it difficult to use the site. The site also supports the latest technologies. Summing up the analysis, opony.pl website has been designed in a more salesoriented way than for positive user perception. Many customers wishing to purchase tires via the internet will decide to check the offer of this store. However, if the customers of the store are not convinced by the good price of the products, they will quickly refrain from further reviewing the store’s offers by going to competing portals.

3.4 Analysis of the 24opony.pl The last shop analyzed is the 24opony.pl service. Compared to previously analyzed pages, the 24opony.pl is characterized by a very rich graphic design. It is accompanied by an overgrowth of form over content but in the positive sense of the word. The information on the Page is often presented using pictures, slides, or moving presentations. The page designer focused more on the graphic appearance of the Page, leaving in several places the inaccuracies in the form of too small a font or badly contrasting with the current background. However, compared to the general appearance of the site, these defects will go unnoticed by the user, whose sight will be more focused on the positive features of the store (Fig. 26). Searching on the desired tires page should not cause the user any trouble. The available forms are very intuitive and pleasant to use. The user has the option to select the most important parameters, after which he receives a list of available models. The results of the tire search are presented in a very colorful and legible manner. At the very top of the results are presented three of the most recommended models of tires with their short characteristics. The models shown are divided into three main categories depending on the class of the tire: premium, medium and economy. Below is a list of all available models that meet the search criteria you specified earlier. Each item is marked with special-colored symbols, thanks to which the user, without the reading the descriptions of the tire, can determine the basic information about a particular model. An interesting solution available during the search is a description of the necessary for the delivery of a particular tire model. Each displayed item has information specifying the amount of time it takes to deliver the tire to the customer (Fig. 27). Users who choose a specific model from search results will be redirected to a subpage where they will receive detailed information about the selected product. Customers have the opportunity to read detailed feedback on the tire, tire rating, testing and characteristics. All this data is presented in a very colorful and userfriendly way. Besides, other recommended tire modes are displayed on the selected tire page, meeting the criteria you are searching for that may be of interest to you. Besides, 24opony.pl the possibility of purchasing tires, the user will also find numerous interesting articles, including tire tests and technical advice, on purchasing

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Fig. 26 Appearance of the 24opony.pl store

and using tires. The potential customer will be much more likely to visit the 24opony.pl, being able to read the information of interest in addition to purchasing the items of interest to them (Fig. 28). The site is non-responsive, displaying it at low resolutions, does not cause errors. However, it makes it difficult to use the site. The site also does not support the latest technologies and contains errors when displaying it in older browsers. Summarizing the analysis, the 24opony.pl website strongly encourages the user to use its functionality. A very rich interface and equally rich functionality of the site encourage frequent visits to the site. Certainly, many people who want to buy tires by electronics will decide to check the offer of this store (Fig. 29).

4 Design and Implementation of the Created Online Store The following chapter discusses the construction and operation of the created online store. Describes the steps a user must take to perform the most common operations in the created application.

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Fig. 27 Search results for specific type of tire on 24opony.pl

The designed online store is an online bakery, allowing you to buy bread for grocery stores for different days, weeks and months. The application is mainly aimed at companies (grocery stores), which place daily orders for new products.

4.1 Characteristics of the Online Bakery Industry The following characteristics were based on the commercial information obtained from the bakery. The basic functionality of an online bakery should be the ability to order products online from various chain stores located within the bakery and its surroundings. According to an industry person, the app should allow you to order pastries on different days of the week. A very important element is the accuracy of the Order. The selected product should be characterized by bakeries so that potential stores have no doubts about the type of product ordered.

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Fig. 28 Additional articles, tests and opinions on the 24opony.pl

In the catalog of bakery pastries available, many different products are often called quite similar, although they are completely different products. The customer, reading or watching the product in question, needs to know what exactly he wants to buy and should not doubt whether the product he is ordering is the one he needs. Products should be cataloged and easily recognizable by the customer. A good solution would be to place photos of individual equipment products in the online store. The next important functionality should be the ability to order products for different days and weeks. Many customers of the company order products by phone immediately for the whole week, which for those accepting the Order is quite problematic when it comes to maintaining the right Order and hierarchy in the accepted orders. The designed system must clearly order orders for individual days for both the customer and the bakery. Ordering at the bakery is different every day and is not repeatable the next day. The application should have basic order management mechanisms so that both the customer and the employee do not encounter problems with orders for the next day. Store customers should be able to easily, best catalog different

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Fig. 29 Description of a tire found at 24opony.pl

products and be able to receive information about new products, promotions, events or special pastries for occasional days [31]. The created application should work correctly on mobile devices and be adapted to them. This option is essential for product delivery workers because, based on system data, they could check future orders on mobile phones or tablets and easily plan their

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next deliveries. For bakery customers, it would also be a convenient way to order pastries without the need for access to a desktop computer or laptop. Customers could order products both during their shop hours and in time off from duties, whether or not the bakery is open. Additional elements that should be included in the online bakery are: terms and conditions of purchases, conditions of complaints and returns of purchased products, shipping costs, deadlines for processing ordered products, and contact to the main store or representative of the bakery.

4.2 Description of the Technologies Used to Design the Online Store The following technologies were used to solve the task: • • • • •

HTML5 and xHTML 1.1, [32] PHP 5.4.8, CSS3 and CSS2.1, JavaScript 5.6 and 5.7, MySQL 5.5.28.

In addition, a local server was used to complete the application, created using XAMP version 1.6.7 [33]. The technologies listed above have been chosen because of their compatibility with virtually every most popular web browser. Thanks to HTML5, the created site has obtained the latest quality standards, and in some time, when new technological solutions are created and the old ones are abandoned, the created Page will still be up-to-date and working properly. Due to the use of the latest technologies, when designing this site, it was also necessary to ensure the compatibility of the application with older software that does not support HTML5 technology. To achieve the same effect for both new and older browsers, older HTML version 1.1 technology was used. The combination of the two technologies made it possible to reach a larger group of potential customers of the bakery. To enable applications, among other things, to generate real-time information, manage information, perform advanced algorithms, sending messages and electronic notifications, as well as connecting to the database, PHP language was used [34]. Another technology used was CSS3 and CSS 2.1. Both technologies have been used to meet the latest HTML5 standards while maintaining compatibility with older browsers. CSS separates the elements that are responsible for the presentation (display) of the Page from the content of the Main Page. The last technology used in the online store was JavaScript. The scripting language has been used to get the most interesting visual effect of the Page. Written scripts allow the Page to run dynamically without constantly refreshing the Page so that the operations performed on the site run faster and with greater transparency of the Page [35].

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4.3 Construction and Functionality of the Created Website The presented website is designed to meet as much as possible the expectations of its potential customers of online bakeries. The created online store has the following functionalities: • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Registration of a new user Activation of a newly registered user Sign in to an existing user’s account Log off a previously logged-in user A reminder of a password forgotten by the user Memorize a session once a user is logged on Change the user data provided during registration Ordering a newsletter by an unregistered user An overview of the latest events and promotions in the store An overview of all available products in the store Ordering different products for different days, weeks and months Edit orders that have not yet been completed An overview of contracts that have already been fulfilled An overview of the orders placed, prepared for execution Completion of contracts to be executed Delete individual orders that have not yet been completed An overview of the value of customer orders An overview of the value of individual orders Product overview including user discounts Overview of products in different categories Overview of the terms and conditions of purchases in the store Send messages to different company representatives via mailbox or contact forms An overview of the access route to the store, with the possibility of setting your route Search for information in the store An overview of the most frequently asked questions by users An overview of the company’s user-entered data Change your e-mail address and password An overview of the discounts granted, per user Set your preferred delivery times for the products you order Reporting an error, a problem in the operation of the online store by the user The possibility of filing a complaint with the user Linking the online store to social networks, such as Facebook, Twitter or Google Support for online store on mobile devices such as mobile phones, tablets, smartphones Customize the appearance of the store to the device that supports it (Fig. 30).

Header part of the Page. One of the most important elements of each Page is its header. The figure below shows the bakery logo with the slogan advertising the

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Fig. 30 Appearance of the home page in the designed online store

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Fig. 31 Header of a designed online store

company in the upper left corner of the page header. After clicking on the company logo, the user will be taken to the Main Page of the created online store (Fig. 31). In the middle of the header was placed a phone number to the main bakery facility. If we hover (mouse) on a given phone number, it will be highlighted, and when you click it, the user will be taken to the contact information page of the store. The direct contact with the bakery at the very beginning of browsing the site significantly increases its credibility. Customers trust more with parties with whom they can make easy, direct contact. In the upper right year of the header is placed a small login and registration panel, allowing you to quickly identify the user and place a new order. The panel allows you to log in, go to the registration form and give you the option to remind your password if it has been lost or forgotten. At the very bottom of the header part, there is a main menu of the Page, which allows you to quickly navigate the Page and search for the necessary information. The menu includes: • • • •

Go to the home page possibility to place an order (after logging in in advance), an overview of the products available in the store, terms and conditions of the shop and contact the bakery.

Besides, the navigation section contains a search engine contained on the website. The entire part of the header is repeated on each subsequent subpage so that once remembered the layout of the application allows you to navigate quickly. Dynamic elements in the header are marked accordingly so that the user can quickly separate information that allows further navigation from those that convey only the content (changing colors, changing the pointer, dynamic effects, lightening or dimming objects). Store home page. The home page of the store has been divided into three main sections: imager, product, aside. The Imager is an element of the site that displays news, events, and promotions related to the bakery. It is a mini-content reviewer, which is designed to reach the customer directly from the very beginning of browsing the shop. Navigating the Imager is very simple and intuitive. Using visible arrows, we can display more slides and watch the next information. Also, there are navigation buttons below the photos that indicate which slide you are currently viewing and allow you to directly switch the slide to the one you specify. The transitions between slides are accompanied by a

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simple animation, which increases the readability of the application and significantly affects the positive reception of the Page by the user. Product is an inventory of the main product categories that are available on the site (Bread, Rolls, Sweet, Special). Thanks to clear drawings, the user can easily, visually characterize the products that are available in the store. This is an important element on the home page because a potential user who visits the site, looking for content of interest to him, often visits only the Main Page of the site, which must encourage further navigation. If the user does not find the items they are looking for on the Main Page, they will not view further subpages. Also, the products are accompanied by dynamic effects that increase the reader’s readability and reception of the Page (Fig. 32).

Fig. 32 Home of the designed online store

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Fig. 33 Footer of the designed online store

Aside is the last element placed on the Main Page of the site. It is divided into two modules, which should be easily and quickly available already on the first Page. The first is Newsletter, where you can sign up and receive information via e-mail about promotions, events and news that take place in the bakery. The second element is a link to the purchasing regulations and a brief description of the activity. The average showing of the rules of the bakery increases the credibility of the store. By directly showing the rules, the authors of the site already at the beginning want to convince the potential customer about the credibility of the company and allow you to easily and quickly get acquainted with the rules on ordering baked goods. Page footer. Footer is a more extensive navigational version of the site. Refer to the most important subpages of the store. It is divided into three main parts: information section, account management, page menu (Fig. 33). “Information” is intended to provide the user with basic information, such as terms and conditions, frequently asked questions (FAQ) and contacting the company. “My Account” contains all the necessary links to manage your orders and account. Thanks to it, the registered customer can easily and quickly change the data of the registered company, check current orders, check the history of orders or report a possible error in the service. With the ability of a customer to report a problem directly, administrators can resolve a specific user-specific issue more quickly. The “menu” is the last part of the footer and reappears the same items as the main page menu (in the header). By duplicating the menu value at the bottom of the Page, a potential user, when reading long content (for example, in terms and conditions), does not have to return from returning to the beginning of the Page to return to the navigation section. He can use the menu in the place that is most convenient for him. In the footer, there are also links to social networks to which the bakery is affiliated. Order form. The order form is a subpage that can be accessed from both the main menu and the footer of the Page. To view the form and place an order, you need to log in. The form is divided into two main parts: • selection of delivery date, • list of available products to order. In the first part of the form, located on the left, the logged-in user has the option to choose the date on which he would like to receive the Order. The application allows

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you to place an order up to two months ahead, counting from the next day on which the Order is placed. This is a deliberately assumed ban so that users cannot change their Order when it is already being processed by the bakery. The next steps it needs to take to place an order correctly. Then the customer of the store has the opportunity to choose the month for which he wants to place an order. When you click on a given month, you’ll see all available days. Each day is marked with both the date, the description and the corresponding color. Moreover, subsequent weeks are separated by a special block to increase the readability of the program. On the seventh day, you have been banned because the designed bakery does not work on Sundays and you are not able to place an order for that day. Orders can only be placed until 23:59 of the day preceding the day on which the Order is made. After this time, the day will not be already available on the form and it will not be possible to place an order or to correct it (bakers join the work) (Fig. 34). After choosing a preferred date, the user has the opportunity to view the orders he placed on the selected day. If the store’s customer has not yet placed an order on the selected date, they will receive the message: “no order”. By using JavaScript, the user can view any terms without having to reload the Page. The data is updated every time we select the day, we are interested in. Additionally, in the available form, the user has the option to delete an unnecessary item. For each ordered product, there is an additional field, after which the selected product will be removed from the order list (Fig. 35). In the second part of the form, located on the right side, the user has the opportunity to order a specific product. The form displays all the products that are available in the selected category and brief information about each product. The user, as in the case of choosing the month of the Order, has the opportunity to choose the categories of products he wants to order (Fig. 36). After selecting an interesting category, the user has the opportunity to view all the products available in that category. Each product has its distinctive photo so that in a quick, visual way the user can recognize the drink and there is no possibility of confusion. Also, a brief description of the product is placed below each photo (Fig. 37). Each product is accompanied by a simple form, allowing the user to enter the quantity of products they want to order. The size of the Order can be entered by the user from the keyboard or using a pointer (mouse) by clicking the corresponding buttons (Fig. 38). In the lower right corner of the window of each product, you can see its price, calculated based on the base price of the product, from which the discount has been subdued. Discounts are calculated individually, depending on the customer’s arrangements with the bakery. After selecting a given product, the user indicates its quantity and then confirms the Order by clicking on the “Order. The form will automatically add a new record to the database without reloading the Page, display a new entry on the selected date, and increase the order value for that day. If a newly ordered product already exists in the Order for the day, the form will not add a new

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Fig. 34 Order form of a designed online store

item, but will only increase the number of ordered products. This procedure increases the transparency of the website and reduces the volume of the store database. Both above and below the order form is a piece of information about the value of the Order that the customer placed on a given day. The order value is updated on an ongoing basis, with each record added or changed in the database (without reloading the Page) (Fig. 39). Each of these forms is adequately secured and does not allow incorrect values to be entered into the database. Any attempt to enter data incorrectly shall result in the user being informed of the irregularity. Contact bakery. You can navigate to the company data subpage by using the main page menu, page footer, or page header. The contact module with the company is divided into three sections: contact with the company representative, contact with the main branch of the company, contact form (Fig. 40).

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Fig. 35 Sample overview of an order placed in a designed online store

The first section, “Direct Contact” allows you to contact the relevant online procurement specialist directly. There is a dedicated section that allows the user to contact a person who will be able to help in case of difficulties in placing an order or problems in operating the online store. The person you contact will be an employee of the company responsible for the online sale of products. In this section, we have a telephone number available for the bakery service and an active e-mail address, automatically redirecting to the user’s mail program. The second section of “Contact the Company” is to contact the main bakery, where the customer of the store can, among other things, get more information about the ordered products or personally visit the headquarters of the company. This is a guarantee to the customer that the bakery has the appropriate nutrition certificates and has passed the inspection of. A self-respecting company will not buy products that could result in the loss of a customer or expose the good name of the company. Also,

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Fig. 36 Selection of ordered product categories in a designed online store

Fig. 37 Product view in a designed online store

Fig. 38 Entering number of selected products in a designed online store

Fig. 39 View of the value of a placed order on a given day by the user

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Fig. 40 Subpage providing the possibility to contact the bakery

this module has an overview map, thanks to which the customer has the opportunity to quickly recognize the main bakery establishment and the access map with the listed address of the company. In the last section, there is a contact formula with a representative of the bakery. Customers of the store, even if not registered, have the opportunity to submit

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comments, problems or inquiries directly via the website. Users don’t need to sign in to private mail or watch company hours to contact the bakery. You can send a query form at any time of the day. The recipient will read the message after the start of working hours. The entire contact form is adequately secured (data validation). Each field in the form has appropriate patterns that failure to do so will not allow an incorrect application to be submitted. This will reduce the number of unnecessary messages (spam) and the number of errors made by the person sending the request. The sent form is forwarded to the mail server, which sends the appropriately formatted text to a predefined postal address. Terms and conditions of the store. The terms and conditions of the store are an inventory of all the rules that apply since placing orders in the created online store. The user can create it using the main menu of the Page, the footer of the Page or the home page (Fig. 41). The rules of procedure subpage are divided into two sections: the table of contents and the content of the articles. The table of contents contains links to individual points of the Regulations. Allows you to move to the appropriate article without reloading

Fig. 41 Terms and Conditions of the designed online store

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Fig. 42 FAQ—frequently asked questions of the designed online store

the Page. The content of the articles contains all the rules to which you should follow when using the created online store. Each article has a link to return to the table of contents. FAQ—frequently asked questions. The FAQ is accessible only from the footer of the Page. Provides answers to frequently asked questions from store users. Each question, as in the regulations, has been accompanied by a link, moving to the beginning of the article (Fig. 42). Register a new account. Access to the registration form is done in the header of the Page, in the login panel. When you click on the appropriate link, the registration form will be displayed to the user. The form at the top has a brief instruction on how to fill it out correctly and the conditions that the user must accept when registering in the created store (Fig. 43). The registration form shall be used for the required validation of the data. The user provides only the data that is necessary for the bakery to issue VAT invoices. The Page does not force any additional information. After registration, the system saves the data to the database and sends an e-mail with the activation field to the postal address provided during registration. The user can log in to the system only after activating the account (after clicking on the activation link sent). A user’s account without activation will not allow you to log in and will inform you of the appropriate lack. Overview of products available in the store. You can review the available products by selecting the appropriate product category on the store’s home page or in the

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Fig. 43 Registration form in a designed online store

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Fig. 44 Overview of available products in a designed internet store

footer of the Page. On the site, users have available four main product categories: Breads, Rolls, Sweet and Special. Depending on the category you choose, different products will appear on the Page. Each product has a short characteristic and the base price of the article (no discount) (Fig. 44). Overview of ordered or delivered products. Registered customers of the store have the opportunity to view the products they have ordered or products that have already been delivered to them. Both the delivered products and ordered products options are available after logging in from the footer of the website. When you select the “Ordered” or “Delivered” link, the user will be shown a form in which they will have to select the period during which they want to review. After selecting the appropriate date from the available calendar, the user will be displayed with all placed orders from the selected period (Figs. 45 and 46). Overview of user data. After registering and activating the account, the user can view or change the data entered during registration. Access to user data is possible from the footer of the website, after logging in (Fig. 47). Your data, in addition to the information entered during registration, includes information such as the current discount and the preferred delivery time of the ordered products. The user can see the discount granted to him and set the hours during which

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Fig. 45 Date selection, no needed to entry keyboard data in a designed online store

Fig. 46 View your orders in a designed online store

he would like to receive the ordered products. The minimum discrepancy between the preferred delivery times must be at least half an hour. Each field contained in the account settings forms has the appropriate data validations. When you change your e-mail address to both the old and the new address, a message is sent to inform you that changes have been made. Troubleshooting and troubleshooting form. Form for reporting problems and store faults is accessible from the footer of the website after logging in. Send a message immediately to store administrators. The form has adequate data validation and does not require any additional information other than a description of the reported defect (Fig. 48). User login. The login panel is available in the page header. After the correct registration and activation of the account, the user has the opportunity to log in to the created online store. If the account is not activated or if the incorrect data is not available, the user will be informed of the corresponding error (Fig. 49).

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Fig. 48 Application form

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Fig. 49 Login panel

Fig. 50 Logout button

User logout. When the user logs in, the system will automatically block the possibility of re-logging in and will provide basic information about the logged-in user and the possibility to log him out (Fig. 50). The application remembers the user’s data until the current browser session expires. To avoid unwanted access to your account, we recommend that you log out as soon as the in-store operation is complete. User password reminder. If you don’t remember what password you entered when you registered your account, you can remind your account. When you click on the “recall password” option in the login panel in the header of the Page, the user will be asked to enter the e-mail address he provided when registering. If you provide the correct data, the mail server will send an encoded version of your old password to the e-mail address provided. The current, forgotten password will not be changed. If a password reminder is requested by an unauthorized person, the store user will be able to log in with the last password set at all times. In order to maintain the security and privacy of your data, the store database does not store original passwords, but only encoded passwords (Fig. 51).

4.4 Page Characteristics The designed Page is readable and graphically correct. The store does not contain items that would cause it to load freely. The application has a clear and easily accessible menu, where the most useful information is placed. Both font selection and font typeface allow you to read the Page seamlessly on both mobile and desktop devices. The site has been written correctly in terms of programming: it meets the standards

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Fig. 51 Password reminder

of HTML5 and CSS3, does not contain errors, has numerous programming treatments, affecting the positioning of the site: headers, web robots, keywords, special construction of subpages, titles, sections, descriptions, links, tags for special words, special file construction, references. The site is divided into multiple sections to help you identify individual objects on the Page [36]. The site contains numerous dynamic effects that allow you to navigate the store faster, without unnecessary overloading. The application is compatible with the most popular browsers currently in use. The site has backward compatibility, correctly supports the most popular older browsers, such as Microsoft Internet Explorer, as well as forward when it meets standards that may be introduced in the near future. The site is fully responsive. It uses Responsive web design technology to ensure correct display on mobile devices. The site has not implemented a responsiveness mechanism for older browsers because the number of mobile devices that use older browsers is very small. The site is written according to PHP standards, version 5.4.8, does not contain elements that could cause the store to malfunction in earlier versions of PHP (Figs. 52, 53, 54 and 55).

5 Limitations There were several limitations during the research, mostly due to time and resource constraints. One of the limitations of this research is the lack of security. To increase security, it is good to focus on GDPR and ISO standards. This is mainly due to time. In 2012, when the topic was drafted, the GDPR lexicology did not exist and therefore could not be implemented. ISO standards require high financial demands of an intermediary, which entrepreneurs often cannot afford in their processes and on their websites at the beginning of their existence. Another limitation is the insufficient analysis of the future of websites in terms of scalability. The lack of evaluation of the increased number of users and thus the use of various tools to stabilize web servers would deserve more attention in future research. Similarly, information about value-added tax (VAT) has not been

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Fig. 52 Illustrative appearance of the created store displayed on the standard desktop monitor

implemented within the countries of the European Union or the rest of the world, regardless of whether we focus on the import or export of products. Overall, these limitations and problems do not necessarily affect the validity of the findings. The results provided in this research can serve as a guide and at the same time a tool for evaluating the quality of websites.

6 Summary Most of the online stores analyzed are not adequately adapted to the requirements of internet users. When designing online stores, pay special attention to the audience to which the website is directed. A well-designed app allows you to reach more customers. Designers need to pay attention to the fashion and trends that prevail at the time of application development. Internet users are quicker to assimilate things that they know and like. The answer to the question of whether it is worth creating their own online stores, each user should give himself. Statistically, 13.5 million Poles aged 15 to 60 actively use the online form of shopping (data made available through the online payment operator PayU). This is one in three Poles who have the chance to visit and purchase the product in the created online store [37].

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Fig. 53 Illustrative appearance of the created store, displayed on the screen of a tablet arranged vertically

The most important thing that designers forget about online stores is the mobility of the designed store. None of the pages analyzed displayed correctly on mobile devices. Referring again to statistics, 70% of mobile phone users with internet access actively use mobile Internet services (data available through research by the World Internet Project). This is a huge number of potential customers of the created store. Designed and the application of the online store was created with a special focus on the problems and bugs discussed in the specific chapter, which were found during the analysis of existing online stores. Based on the created application of the online store, PHP language was also evaluated in terms of suitability in creating online stores along with the combination with the latest technologies of HTML5 and CSS3 [38]. PHP is very quickly interpreted by the webserver, does not slow down the operation of the web application and is ideal for creating online stores in combination with the latest technologies HTML5, CSS3 and responsive web design. Also, PHP language allows you to easily and quickly define and create your own functions, does not require complicated syntax, is free, open-source software, works independently of your platform—works properly on Windows, Linux, Macintosh and many others, less popular operating systems, works

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Fig. 54 Illustrative appearance of the created store displayed on a mobile phone with large display

with many databases (for example, MySQL, PostgreSQL, SQLite) and servers(for example, Apache), is a project constantly being developed (on January 24, 2013, the latest version of PHP 5.5.0 Alpha4 was introduced) and very popular (virtually every hosting provider allows PHP support on its server). The disadvantage of PHP is its low support for the security of the applications being created. Developer knowledge often determines the level of security in a design of an online store. You can also add flexibility to negative PHP pages. Achieving the same effect in PHP is possible in different ways. This flexibility means that the developer often needs to test different solutions to determine the most efficient outcome [39].

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References 1. Bargieł, D., Marek, S.: PHP i MySQL: tworzenie sklepów internetowych. Wydawnictwo Helion, Gliwice (2004) 2. Gajda, W., Wydawnictwo Helion: HTML5 i CSS3: praktyczne projekty. Helion, Gliwice (2013) 3. Bowers, M., Synodinos, D., Sumner, V.: Pro HTML and CSS3 Design Patterns. Apress ; Distributed to the book trade worldwide by Springer Science + Business Media (Berkeley, CA), New York, NY (2011) 4. Welling, L., Thomson, L.: PHP and MySQL Web development, 4th edn. Addison-Wesley, Upper Saddle River, NJ (2008) 5. Freeman, E., Freeman, E., Lam˙za, A.: HTML5. Helion, Gliwice (2012) 6. Frankowski, P.: CMS: jak szybko i łatwo stworzy´c stron˛e WWW i zarz˛adza´c ni˛a. Wydawnictwo Helion, Gliwice (2007) 7. MacCaw, A., Kaczmarek, D.: JavaScript: aplikacje WWW. Wydawnictwo Helion, Gliwice (2012) 8. World Internet Project. http://www.worldinternetproject.net/. Accessed 5 Feb 2021 9. Gardner, L.D., Grigsby, J.: Head first mobile web. O’Reilly, Sebastopol, CA (2012) 10. Wiod˛aca Agencja Marketingu Internetowego! In: Performance Media. https://performancem edia.pl/. Accessed 5 Feb 2021 11. gemiusRanking. http://ranking.gemius.com/pl/. Accessed 5 Feb 2021 12. MacDonald, M.: Tworzenie stron WWW: nieoficjalny podr˛ecznik. Helion, Gliwice (2012) 13. Molnár, E., Molnár, R., Kryvinska, N., Greguš, M.: Web intelligence in practice. J. Serv. Sci. Res. 6(1), 149–172 (2014). 10/gg96kz 14. Grzesiak, P.: Jak zarabia´c w Internecie: poradnik dla przedsi˛ebiorczych webmasterów. Helion, Gliwice (2007) 15. Wrotek, W., Wydawnictwo Helion: CSS3: kaskadowe arkusze stylów : przekonaj si˛e, jak łatwo tworzy´c atrakcyjne strony WWW dzi˛eki CSS3. Wydawnictwo Helion, Gliwice (2013) ˇ Tˇ J: GDPR pre obchodné spoloˇcnosti. Verlag Dashöfer, vydavateˇlstvo, s.r.o., 16. UHRINCA Bratislava (2018) 17. Valentová, T., Birnstein, M., Golais, J.: GDPR/Všeobecné nariadenie o ochrane osobných údajov; Zákon o ochrane osobných údajov. Wolters Kluwer, Bratislava (2018) 18. Makýš, P., Šlúch, M.: Systém manažérstva kvality podˇla ISO 9001:2015 a jeho audity podˇla ISO 19011:2018. M KREO, s.r.o., Žilina (2019) ˇ 19. Šteker, K.: Rízení ekonomického procesu podniku pomocí informaˇcních systém˚u. GEORG, Žilina (2011) 20. ISO 9001:2015—What is the 9001:2015 Standard? | ASQ. https://asq.org/quality-resources/ iso-9001. Accessed 6 Feb 2020 21. ISO 9001:2015 Definition | What is ISO 9001:2015? | Find ISO 9001:2015 Companies on ThomasNet.com® Certification Search. https://certifications.thomasnet.com/certifications/glo ssary/quality-certifications/iso/iso-9001-2015/. Accessed 6 Feb 2020 22. ISO 9001:2015(en): Quality Management Systems—Requirements. https://www.iso.org/obp/ ui/#iso:std:iso:9001:ed-5:v1:en. Accessed 6 Feb 2020 23. ISO IEC 27001 2013 Translated into Plain English. https://www.praxiom.com/iso-27001.htm. Accessed 6 Feb 2020f 24. ISO/IEC 27001 certification standard. https://www.iso27001security.com/html/27001.html. Accessed 6 Feb 2020 25. ISO/IEC 27001:2013(en): Information Technology—Security Techniques—Information Security Management Systems—Requirements. https://www.iso.org/obp/ui/#iso:std:iso-iec:27001: ed-2:v1:en. Accessed 6 Feb 2020h 26. What is ISO 27001:2013 Information Security GDPR. In: Certification Europe. https://www. certificationeurope.com/certification/iso-27001-information-security/. Accessed 6 Feb 2020 27. Poniszewska-Maranda, A., Matusiak, R., Kryvinska, N., Yasar, A.U.H.: A real-time service system in the cloud. J. Ambient Intell. Human Comput. 11(3), 961–977 (2020). 10/gg96ks

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28. What is a Load Balancer?—Load Balancing Definition—Citrix. In: Citrix.com. https://www. citrix.com/solutions/app-delivery-and-security/load-balancing/what-is-load-balancing.html. Accessed 5 Feb 2021 29. The comprehensive guide to VAT in Europe for ecommerce sellers. https://www.webinterpret. com/au/blog/vat-ecommerce-europe-guide/. Accessed 5 Feb 2021 30. Bauer, W., Kryvinska, N., Dorn, J.: Model of Trust Management for Digital Industry Services. Towards E-Commerce 4.0. arXiv:201101523 [cs] (2020) 31. Home. In: Ann’s Breads. http://annsbreads.co.uk/. Accessed 5 Feb 2021 32. W3Schools Online Web Tutorials. https://www.w3schools.com/. Accessed 5 Feb 2021 33. PHP: Hypertext Preprocessor. https://www.php.net/. Accessed 5 Feb 2021 34. Fedushko, S., Ustyianovych, T., Gregus, M.: Real-Time High-Load Infrastructure Transaction Status Output Prediction Using Operational Intelligence and Big Data Technologies. Electronics 9(4), 668 (2020). 10/gh35dm 35. Stefanov, S., Walkowska, J.: JavaScript: programowanie obiektowe. Helion, Gliwice (2010) 36. Pasternak, Ł.: CSS3: tworzenie nowoczesnych stron WWW. Helion, Gliwice (2012) 37. Rozwi˛azania usług finansowych dla rynków wysokiego wzrostu | PayU Poland. https://poland. payu.com/. Accessed 5 Feb 2021 38. Hogan, B.P.: HTML5 and CSS3: develop with tomorrow’s standards today. Pragmatic Bookshelf, Raleigh, NC (2010) 39. Ross, J.: PHP i HTML: tworzenie dynamicznych stron WWW. Wydawnictwo Helion, Gliwice (2010)

Information Exchange Platform Based on a Q&A Model ˇ Emil Pytka, Ondrej Cupka , René Pawera , and Miloš Šajbidor

Abstract Information exchange systems are the basis on which the current Information age operates. It is therefore important to understand how these systems work and how we can use them to our benefit. This study aims to analyze information exchange platforms found on the internet, how they operate, what benefits they offer, and what disadvantages they pose. To more deeply understand their operation, we created our own questions-and-answers system. In later chapters, we discuss how this system is created, how users can interact while on the platform, and what best practices we used based on our previous analysis of other similar platforms. Based on our research and the system created, we can conclude that while creating a Q&A platform is with the right knowledge easy to implement, and it acts as a very useful tool to support the free exchange of information. Especially in the field of business, such a system may be a major advantage in the field of marketing, recruiting and customer support or when used internally to support the exchange of ideas and experiences between employees.

E. Pytka ˙ Institute of Informatics, Lodz University of Technology, Stefana Zeromskiego 116, 90-924 Łód´z, Poland e-mail: [email protected] ˇ O. Cupka (B) · R. Pawera (B) · M. Šajbidor Faculty of Management, Comenius University, Odbojárov 10, 831 04 Bratislava, Nové Mesto, Slovakia e-mail: [email protected] R. Pawera e-mail: [email protected] M. Šajbidor e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Kryvinska and A. Poniszewska-Mara´nda (eds.), Developments in Information & Knowledge Management for Business Applications, Studies in Systems, Decision and Control 376, https://doi.org/10.1007/978-3-030-76632-0_22

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1 Introduction The Internet, as we know it today, offers us not only entertainment or the possibility of contact with other people. First of all, it is a huge source of information that no human being would be able to assimilate. As the number of Internet users increases, so does the amount of information they produce. Unfortunately, the constantly increasing amount of information that reaches us means that we are not able to properly filter this information and extract from it only what interests us. Therefore, systems that allow the exchange of information, maintaining appropriate filtering, and helping to receive the most valued information, are gaining more and more popularity. Amid the plethora of information provided by the Internet, there are also information management systems maintained within companies. These systems are used to help employees exchange their own knowledge, help in introducing new employees to work in the company, or more recently, to work from home. They also make sure that important information does not leak outside the company premises. These systems, for the most part, act as a repository of knowledge that employees can consult should a problem arise. As we look at the increasing influence of information exchange systems in our everyday life and at work, it can be concluded that we live in an information society. It is possible that soon computers themselves will be able to answer every question, and we can see signs of this in the use of digital personal assistants, such as Alexa or Siri. However, one cannot forget about the human factor, as it is the knowledge of colleagues that becomes the point to which we refer if we do not find the answer on the Internet. It is the employees’ knowledge and the ability to acquire it that increasingly determines the effectiveness and development of the company. In the 90 s of the last century, attention was paid to this, and a set of formalized methods of collecting and using the knowledge of the participants of the organization was created, calling such methods Knowledge Management [1]. To this day, the importance of communication and knowledge-sharing is only rising. And information exchange provides some of the best tools to achieve these goals and support employees in exchanging information inside or outside of the company. The aim is to analyze selected systems supporting the exchange of information. The result of this analysis will be the selection of the most useful functionalities and the creation of a system design that will make them available. It also includes the implementation of this system and the presentation of the advantages of using it. The theoretical part of the work covers the analysis of the existing systems supporting the exchange of information and how it can be used in a business setting. The functionalities of these systems will be described in detail, and those that can help in the exchange of information in the implemented system will be selected. The practical part includes the design and implementation of the proprietary information exchange system, which will be based on the question-and-answer model, and will include additional functionalities included in analyzed systems. The scope does not cover system security. In the second chapter is where the most popular information exchange systems are described, and their advantages and disadvantages are indicated. The third chapter

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describes the tools, technologies, and methods of creating dynamic network applications used to carry out part of the practical work. Chapter four contains a description of the created system with an emphasis on the functionalities it provides. In the next, fifth chapter of the work, there is a description of the application from the user’s level. The last chapter presents a summary and conclusions that can be drawn.

2 Information Exchange Systems In the following chapter, we are going to analyze a few selected types of information exchange systems, giving examples of such solutions and pointing to their advantages and weaknesses as well as give examples of information systems applied to businesses. Any system that allows for the sharing and exchange of knowledge between users can be called an information exchange system. There are many such systems that run as a webpage or as a separate program on a computer. All these systems undoubtedly have their own advantages and disadvantages, and some are very well suited for use in open groups, that is, groups that everyone can join. Others, on the other hand, are used to exchange information only between two people. The variety of these systems allows the user to choose the right tool for a specific operation. Unfortunately, despite a large number of such systems, there is still no appropriate platform to support the exchange of information in closed groups, for example, between company employees. And to harness the positives of continued digitalization [2]. Such systems often need to be custom-made for a company.

2.1 Systems Based on a Question-and-Answer Model The question-and-answer model is fundamentally a model for exchanging information where a question is answered via the internet by people with varying degrees of anonymity. On the internet we can observe countless systems of this type, but only a few reach meaningful amounts of traffic. Just like with social media, there is a “snowball effect” where increased numbers of users lead to more questions asked with more and higher quality answers, which in turn lead to more users visiting the site. Most of these sites are therefore operated by large companies, such as Google or Yahoo. Most of the pages are not focused on any topic but rather aimed at the widest possible audience. Which is underlined by the inability to create custom subsystems by users, only creating new questions [3]. How websites organize questions and answers is illustrated in Fig. 1. The most important piece of information on the page is the question, which is always placed at the top. The answers are placed under this question, while the users decide whether the answer will be placed immediately below the question or below by casting their

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Fig. 1 How the question-and-answer model works. Source Authors own creation

vote on a specific answer. The most scored answer is generally then placed at the very top. This is done with the use of algorithms and increasingly often with the use of machine learning [4]. The questions can be further categorized based on their objectivity or their focus on the past, present, or future, as shown in Table 1. Due to the multitude and variety of Q&A websites, we chose four of the most popular and widely used for further analysis, namely: Yahoo! Answers [6], Quora [7], Stack-Exchange [8], and Answers [9]. We are also going to analyze the year 2014 discontinued Google Baraza as it provides an interesting example of a Q&A system used for a limited time to reach a certain goal [10].

2.1.1

Yahoo! Answers

Yahoo! Answers is part of the Yahoo! group, which has existed since 1995 and is still popular, especially in the United States. The website is aimed at the entire community of Yahoo! users. Questions may belong to one of several dozen categories. But just like many other popular Q&A websites, it is aimed at a broad audience, therefore hosting questions on any topic. Finding answers to specific questions would require the use of the website’s search engine (Fig. 2). Questions can be posted and answered by all registered users. To keep the Content up-to-date and increase the traffic on the website, each question has a validity date, after which it will not be possible to answer. This causes the community to naturally lose interest and ask further questions whilst providing new Content for the website and keeping interest high. The default is three days, but it is possible to change the validity period to a minimum of one hour and a maximum of seven days. Additionally, users are scored based on their behavior on the website to incentivize more activity. Each new user receives 100 points immediately after registration. Depending on their behavior, points can be added or subtracted. Points are awarded or subtracted based on the following actions [11]: • “Asking a question”—5 points are subtracted, • “The best answer” was given to your question—3 points are added,

(present-focused) (Dis)Approval

Identification

Directed at establishing a focused discussion (and potentially building relationships) among people with a shared commitment to a topic.

What’s the next band What’s your fit- write you want to see get a Beatles song? Rock Band “special edition”? I wish they would do the Ramones. I would want to be DeeDee. Who would you be?

(future-focused)

Advice

Directed at generating a new (or specifically tailored) solution, approach, or plan rather than locating or implementing an already existing solution. Grounded in the questioner’s desire to inform future action

My parents say that playing “The Beatles: Rock Band” is a waste of time. How can I persuade them that it will actually help me learn to play music?

Directed at encouraging readers to offer a “favorite” or “least favorite”, with the implicit understanding that answers will be—at root— subjective opinions

Epideictic

Deliberative

Subjective

Table 1 Rhetorical taxonomy of question types [5]

What’s the beta Ramones Song?

Directed at seeking the “best” or “worst” example of a given class, or at weighing the relative merits of a given product, item, or concept, with the implicit understanding that answers will be—at root—objectively grounded

Quality

Objective Forensic

I’ve heard there fe an Easter Egg in “The Beatles: Rock Band” where you can play “Eleanor Rigby” but I haven’t been able to find it. How do you unlock the song?

Directed at pursuing an already developed solution to a problem or challenge. Grounded in the questioner’s desire to learn steps or strategies that are known (through experience) to address or resolve the issue at hand

Prescriptive

(past-focused)

Will my controllers for the Wii version of “Guitar Hero” also work on the Wii version of’The Beatles: Rock Band”?

Directed at seeking an answer that is typically considered objectively or empirically true, such as existing information, data, or settled knowledge

Factual

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Fig. 2 Yahoo! answers homepage [4]

• • • • • • •

“The worst answer” was given to your question—5 points are added, “Answer the question”—2 points are added, “Delete the answer”—2 points are deducted, “Logged in to Yahoo! Answers “- 1 point is added once a day, “Vote for the best answer”—1 point is added, “Vote for the worst answer”—there is no change in the ranking, “Your answer has been selected as the best “- 10 points are added.

Depending on the user’s ranking, they are given a limit of questions, answers, comments, and votes that they can make use of during a single day. Although limiting the increase in new questions, it prevents the site from being overwhelmed by a single user’s questions and decreases the chance for a malicious attack on the website. Yahoo! Answers has a very large number of active users continually posting and answering questions. The system itself is not conducive to question re-use as well as to search for older posts. This additionally motivates users to post a new question instead of searching for an older one [12].

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The advantages of the website are as follows: • connection to the Yahoo! portal, • large user base, • system of awarding points for good answers. The disadvantages of the website are: • • • • •

no possibility to create own systems, ensuring only basic functionality, not very clear interface, insufficient search system, a basic system for categorizing questions.

2.1.2

Quora

Quora differs significantly from the previous page. Among others, it does not belong to any large corporation. The website was created in 2010 by two Facebook employees. Currently, Quora employs about 250 people [7], who are mostly responsible for the development of the website. Unlike Yahoo! Answers, the purpose of Quora is not only to exchange information by asking other users questions, but it also supports other types of information exchange. Therefore, the system is more complex, but all its components seem to work well together, explaining the relatively high traffic of users [13]. During registration, the user is asked to choose a few topics that they are interested in and which types of questions they want to follow. As this is core functionality, registration is made mandatory. Although registration is made easier with the option of using a Facebook or Google account [14] (Fig. 3). As mentioned before, other types of information exchange are offered. And so the system also offers running mini-blogs. Each user can create one or several feeds, where they can place entries that other users can follow. Conjointly, searching for questions is much better implemented than in the previous system, mainly due to the use of topics, incentivizing users to search more often. A topic may be as general as “physics”, but also something more specific as “Stephen King”, the author of fantasy books. These topics can be created and managed by users. Users are also able to send private messages to other users allowing for more private interaction and follow-up questions. Each question is additionally tagged, thus further narrowing the scope of the topic further improving search results [14]. The creators of the system compare it to Wikipedia [15], saying that it makes it possible to supplement knowledge about a given topic even better thanks to the possibility of asking a specific question. Unfortunately, Quora, despite the fact that it seems to be a very polished system and that can be useful by many organizations, does not provide the possibility of creating users own system, which makes it also a website focused on creating a network of users and exchanging knowledge on a wide variety of topics. The advantages of the system are: • the possibility of creating micro-blogs,

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Fig. 3 Quora.com homepage [7]

• an extensive system of topics and categories, • possibility to edit answers, • promoting a question from your own pool of points. The disadvantage of the system is: • no possibility to create own systems. 2.1.3

StackExchange

StackExchange is the most complex system listed in this chapter. Its greatest advantage is that it does not collect questions from all areas but allows the creation of subsystems dedicated to a specific topic. Among the systems based on the StackExchange system, we can find, for example [16]: • StackOverflow—a website for programmers (Fig. 4), • Server Fault—a website for administrators,

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Fig. 4 Stackoverflow.com homepage [18]

• SuperUser—a website for computer users, which allows finding solutions to problems related to the everyday use of computers, • AskUbuntu—a website for users of the open-source operating system Ubuntu [17] Creating the users own systems As of StackExchange 2.0, it is no longer possible to create the user’s own system. Earlier in version 1.0, it was possible to create a system running on StackExchange servers for $125 per month [19]. The only way to create a subsystem running on the StackExchange engine is for the community to gather enough support for it and a willingness to build such a system. Organization of the question All questions within a subsystem are listed together. They are separated only by assigning appropriate tags to them. The user can select which tags they are interested in and which they do not want to follow. If they do, the list of questions on the main page will be arranged specially to their liking. The search system allows being precisely tailored to one’s own preferences. When searching for a topic of interest, the search can be narrowed down by setting the following criteria:

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tags from which posts are to be shown, the author of the question or answer, how many minimum answers were given to the question, a specific question or answer.

Additional functionalities In the StackExchange system, as on the previous pages, there is a reward of users for their activity. The reward system itself is very extensive. Users can get medals for a variety of activities. In addition, as the number of points increases, they get more and more privileges on the portal. An example would be the ability to rate posts, which become active only after collecting 15 points. The advantages of the system are: • • • •

an excellent query search system, promoting the user’s favorite tags, increasing privileges along with increasing the user’s ranking, badge system. The disadvantages of the system are:

• no possibility of creating private systems, • categorization of the question only by tags. 2.1.4

Answers

Answers is one of the most popular Q&A websites, with about 8 million visits per month, most of which come from the United States of America [20]. Similar to other mentioned systems, the website does not specialize in a single topic, although it is more complex than Yahoo Answers, for example. Interactions other than reading and searching for answers and questions require a login, which is made easier with the option of using a Facebook or Google account. Once logged in, a user is able to post questions, answer or rate other questions and answers. Organization of questions Posting a question is very simple and can be specified via the optional “Advanced” feature. This allows a user to not only post a question, but also add context or add up to three topics to categorize it better. There are hundreds of topics to choose from, but a user is not limited to a choice and may write any topic they wish. As can be seen in Fig. 5 the questions are categorized by the interest they generate or their popularity. The site also features two sidebars on the left and right to help the user find what they are looking for. On the left is a choice of the most popular topics and on the left a selection of trending, unanswered, and previously viewed questions.

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Fig. 5 Answers.com homepage [9]

Additional functionalities Answers are organized by the ratings given by users, with the most upvoted ones put on top. Users can both upvote and downvote answers as well as comment on the answer and react to them with emojis. The search function is very broad, searching through all questions and answers containing the words searched for. They are making it easier to post a new question rather than searching for an existing one (Fig. 5). The advantages of the website are as follows: • • • •

large user base, system of awarding points for good answers, ability to better specify questions, clear interface. The disadvantages of the website are:

• no possibility to create own systems, • insufficient search system. 2.1.5

Google Baraza

Google Baraza is the English-language version of the question-and-answer portal developed by Google. Originally it was developed for Africa, where users used search

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Fig. 6 Google Baraza homepage [10]

engines such as google as if talking to a friend – asking questions instead of searching for keywords [21]. Therefore search results were imprecise or simply not available. Therefore, creating a Q&A system solved several issues at once. It increased the accuracy of answers thanks to the collaboration between users, increased market share and brand awareness of Google, and made users get used to using the internet and similar services. Fittingly “Baraza” is the Swahili word for council [22]. As the popularity of this service decreased, and users began to be accustomed to using internet and especially search engines using keywords, it became clear it served its purpose. Google decided that the service will be stopped in 2014 and remain read-only until 2015 when it was removed from the internet [10]. While active, the logging in to the website was the same as for any other Google services, i.e., via Google Account, which increased the number of Gmail users in Africa. The graphic design was also adapted to all Google services (Fig. 6). Organization of the question The questions on the portal were divided by labels. Both general labels such as sports, education, or specific labels such as basketball, volleyball, teaching were available on the site. The big advantage of the Google Baraza system was the creation of new questions. Already when creating a question, hints for matching labels and related questions were displayed, so it was possible to check if the question has already occurred. In addition, it was possible to create ready-made answers and ask users to vote for one of the ready-made answers, like in polls. Additionally, users could also allocate a pool of points from their own ranking to the person who gave the best answer. This motivated users to answer the question asked.

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Google Baraza was not a system that Google focused on, and it was a side project. Many features were underdeveloped, and the system provided only basic functionality. But for developing countries where internet usage was low, it was among the better services of its kind. The advantages of the system were: • • • •

only the need to log into a Google account, possibility to create a survey from ready answers, system of assigning points for answers, related question prompts when creating the question. The disadvantages of the system were:

• no possibility to create own systems, • ensuring only basic functionality, • poor query cataloging system. 2.1.6

Disadvantages of the Existing Services

While only four active question-and-answer systems are listed, there are many more. Unfortunately, none of them were suitable for the exchange of information between the company’s employees. The systems presented are more focused on large communities. No system allows the creation of custom subsystems for selected users. The only exception was StackExchange, which allows the creation of a subsystem as long as there is a large community around the topic. The presented systems have much more developed functionality than just simple question-and-answer exchange. Some have the option to edit other users’ posts or collect points for correct answers, and some even provide the option of instant messaging.

2.2 Discussion Forums Discussion forums have become a very popular means of discussion and information exchange. They evolved from newsgroups where a user could search and read topics that had been published a long time ago. Currently, there are many different systems for creating customized forums, but the principle remains the same. Data organization Each forum has the same data organization. We distinguish three main elements, such as: • A category that defines to what extent the topics will be covered.

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• A thread is a discussion initiated by one user that begins with asking a question or expressing an opinion on a topic. In a thread, users discuss what is in the topic of a thread. • Post, i.e., a single user response. A post that opened the discussion is no different from the other posts on the topic. Due to the fact that threads can have a lot of posts, just like in a conversation among friends with time, the original topic gets lost, and the posts can be about something completely different. This is a so-called offtopic. Such a distribution of threads and posts allows for free discussion between users. Sometimes, however, the forum is used to ask specific questions. Then, unless properly managed and arranged only chronologically, the first post does not mean the best answer but the quickest one. This generally makes it more difficult for users to search for specific topics, as sometimes useful answers are found only by reading the entire discussion. For this reason, most forums adopted a system to highlight the best post or let users rate them. System management Each discussion forum has its moderators and administrators. These are the selected users who manage the Content which appears on the forum. Moderators have the necessary permissions to edit or delete posts, delete entire threads or move them to another category. Administrators also have the right to edit the forum structure. This gives them the option to add new categories or impose penalties on users violating the community rules. Both administrators and moderators can only get this role from another administrator. This means that the forum must be under the constant care of at least one administrator (Fig. 7). Disadvantages of message boards Systems of this type can be used as a means of information exchange between users. However, this is not an optimal solution. First of all, it requires constant control on the part of moderators and administrators. In addition, users often do not have the option of filtering out redundant responses. This generally results in each user that wants to find an answer to a question in a thread’s topic having to read all the answers until they find the correct one. More advanced forums may use automated systems to filter or delete answers, but they often lack the nuance to for example, differentiate between serious posts and satire. Such systems are therefore unpopular.

2.3 Wiki Under the name wiki, we understand a certain type of website where the Content can be changed by all or specific users with the aim to create factual collaborative articles on a certain topic. One of the most famous projects based on the wiki engine is Wikipedia, which has already become a symbol of the vast amount of knowledge

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Fig. 7 Example of a web forum [23]

found on the Internet. The wiki engine itself was created in 1994 by Ward Cunnigham. Currently, there are many implementations of this engine that allow a user to create their own information exchange systems [24]. Data organization Wiki pages allow users to create articles, i.e., pages on which a topic is described. Each such article has an introduction and the option to create sections. For more straightforward navigation through the article, all sections are included in the table of contents under the introduction. Articles are written using a special programming language or an editor (Fig. 8), which allows for basic text editing (bold, italic), placing a link to another article (even if it has not been created yet), or a bibliographic footnote. Each article also has a separate tab where users can discuss the current topic. The discussions are mostly about what to add and what to remove from the article page [24]. System management The Content of the articles can be changed by all users, and it is possible to make editing available even for those who are not logged in. The final decision of whether the edit meets all the criteria and whether it can be included in the original article is made by an editor, i.e., a person with permission to approve or to reject the edit [24].

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Fig. 8 Example of editing an article on Wikipedia [25]

Advantages and disadvantages of wiki systems Wiki systems are used in many companies as a source from which new employees can learn about the company or projects under development. The system makes it very easy to edit one article by many users. Unfortunately, that may also be the main disadvantage of these systems. The ease of editing makes it easy for bad actors to change the contents to spread incorrect or biased information.

2.4 Portals Promoting Popular Posts Along with the development of websites, users started to play an increasingly larger role in shaping them. Pages that have been called Web 2.0 have been created, making it possible for users to create their own services. An example of a Web 2.0 site is the Reddit portal. It was established in 2005 by two alumni of the University of Virginia. Through the years, it has gained enormous popularity, among other things, due to the fact that the system is practically entirely run by its own users [26]. The idea behind Reddit is very simple. It allows users to post any content, which then has to be voted on by the rest of the community. Each user can add or subtract one point from the reputation of the post. The most popular entries are then shown on the homepage. The algorithm [27] that evaluates the value of an entry takes into account the date it was added and the grade that the given entry has. Thanks to this, the users visiting the home page get filtered, fresh, and interesting information (Fig. 9) [28].

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Fig. 9 Example of Reddit showing the most popular entries [29]

Data organization Reddit is a system that allows the exchange of interesting or funny information, often from other websites, so the post put to the vote is only the title and link to the original page. However, there are other systems that work on the same principle as Reddit, which allows a user to write their own content and share it with other users. An example may be the home page wykop.pl [30]. The entries also have their own categories, and some systems allow filtering according to selected categories. System management Management of such a system is kept to a minimum. This means that administrators only have to monitor whether the Content added by users does not violate the law or community standards. Administrators are often aided in this by the users themselves. Most, if not all, such websites offer an easy way of reporting posts by users [28]. Advantages and disadvantages of systems promoting popular entries The biggest advantage of Web 2.0 systems is content filtering according to users’ preferences. If the users of the website have similar interests, it allows for a better

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selection of Content for each specific user. Additionally, such systems make it easy to filter out unnecessary and unhelpful posts, making the site mostly self-regulating. A clear disadvantage is that these systems are primarily used for entertainment purposes or discussing current events, less often to exchange knowledge and experience.

2.5 Instant Messaging The opportunities brought by instant messaging were certainly one of the greatest advantages that internet users could feel. Mobile phones have already made it possible to talk to other people, often several hundred kilometers away. Instant messaging, however, spread this functionality so much that today we talk to each other using instant messaging without even thinking about the distance between the other person and us. The possibility of instant information exchange has always been an important feature of internet systems [31]. All the systems presented earlier had one major drawback. To get an answer to a question that has not yet been asked, we had to wait for another user to become interested in the topic. Instant messaging makes it possible to receive information immediately if we know whom to ask (Fig. 10).

Fig. 10 Window with contacts in the Signal app [39]

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Instant messaging is very often used in companies where employees have permanent access to computers, for example, in companies from the IT industry. They make it possible to exchange information with another employee without having to leave the workplace. This has allowed such companies to more easily to start interdepartmental and international cooperation as well as offering their employees the option of working from home. Advantages and disadvantages of instant messaging However, the disadvantages of such a solution are very easy to find. While fast, instant messaging can never be faster or clearer than face-to-face communication since the users have to wait for the other to see the message and compose a response and often missing important nuance which is hard to convey in the written word. Communication in instant messaging is also often between two people as users may not know whom to contact, further delaying finding the right answer. Also, answers are generally exchanged privately, making solutions unavailable to other users. Nevertheless, it is still often the fastest and most convenient way of exchanging knowledge with other physically distant users [31].

2.6 Use of Q&A Systems by Organizations It is clear from our analysis that the market of Q&A systems can be considered a so-called red sea or an oversaturated market. This means that being successful with a Q&A system as the primary source of revenue for a company would be more than challenging. But it is also clear that it offers many possibilities to support other functions of a company. Some of the uses were shown by our analysis of the now-discontinued service of Google Baraza, which helped increase market share, internet use, and brand recognition in less developed countries in Africa. But this only scratches the surface. Support for marketing One of the many uses for Q&A websites is certainly for marketing purposes. This allows a company to interact directly with customers and the broad public at little cost. Such a service may be used inside a more private community to test ideas for a marketing campaign or on public websites to promote a product or service or supporting brand awareness with the possibility of winning prizes. This has the added benefit of creating a larger community around the company and its products and services, increasing brand loyalty and awareness, as well as increase the image of the company. Although it has to be said that such efforts often need to be moderated by the organization, a famous example of such efforts backfiring happened to Starbucks in the winter of 2012. At that time, Starbucks encouraged their Twitter followers to share positive stories with the hashtag “#spreadthecheer”, which were publicly shown at a sponsored ice rink in London. But a malfunction of the automated moderating

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caused that any posts using this hashtag were shown, irrespective of their contents. Very quickly, the campaign was hijacked by posts calling out Starbucks for tax evasion [32]. Supporting innovation and interaction Another use for Q&A websites is supporting innovation by supporting interaction both internally and externally. Internal systems may be best for larger companies that want to create a safe common space to share their experience, get feedback on company policy or share new ideas for new products and services or to improve conditions in the company. External systems may also promote customers and the public to give suggestions on how the company may better serve their needs or post problems they have experienced. An example of such use is the forum of IBM. After registering, anyone can ask a question or give a suggestion to the company [33]. While this forum is managed by employees who engage with users to solve problems or answer their questions, other users can do the same while earning rewards. Giving useful answers awards VIP Reward points, which can be exchanged for rewards such as gift cards [34]. This concept of users giving useful suggestions and solutions to companies for their products and services has been the focus of several startups in recent years. An example of such a company is the Munich-based Hyve. On this website, it is the companies that post their questions and challenges they are facing and the users offering solutions. This grants companies access to a near limitless pool of ideas with tangible benefits. Additionally, companies may discover a useful talent that they may decide to hire. In return, users with the most successful suggestions are awarded cash rewards in the thousands of euros [35]. Support for customer service Although mentioned previously, this requires a separate analysis. It is a well-known problem that the adoption of new technologies progresses faster than the proliferation of knowledge on how to properly use these systems. Also, many companies, mainly in the technology sector, take the approach of a minimum viable product which is quickly sent to market before all issues are addressed. These factors increase the need for customer support to help users solve problems with their products and services, driving up costs and worsening the image of the company. A way to effectively tackle this may be with an online forum managed by employees and users alike. This would decrease the strain put on customer services, help customers solve the most common issues, and highlight problems that the company may have overlooked. Maybe the most well-known such forum is Microsoft support. Their users can both find company-written manuals on how to use their services, such as their office package, servers, cloud solutions, etc. [36] or solve issues and a forum where customers can post specific and unaddressed problems [37].

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2.7 Summary The systems presented above show an overview of the current information exchange among internet users. Systems based on the question-and-answer model do not allow the user to create their own applications, while the others are not free from defects. The most sensible thing to do is to combine several solutions so that they complement each other, for example, a combination of wiki and instant messaging. It is important to consider that such systems continuously generate more and more data. This creates both opportunities and challenges to utilize it properly [38].

3 Software and Technologies Used for the Implementation of the Practical Part The following chapter describes the programming and technologies that were used to create the proprietary information exchange system, presented in chapters four and five.

3.1 Software for the Implementation of the QASystems Platform This sub-chapter presents the software that was used to implement the practical part. It was primarily software that allowed to run a network application in the.NET environment, a database server, and an environment for developing and testing software. Application server The IIS (Internet Information Services) version 7.5 server was used to run the QASystems platform on the computer, which acts as the main server for ASP.NET applications on the Windows platform. The IIS server is the second most popular website server [40]. Thanks to the server’s excellent connection to the integrated Visual Studio development environment, the web application is launched with one click. Database server Microsoft SQL Server 2012 was used as the database server due to the integration of the database server with the system on which the application is hosted and due to the very good cooperation of this server with applications written in ASP.NET technology. Due to the fact that this server is developed by Microsoft, most of the database access technologies fully support it. It uses a slightly modified SQL query language called Transact-SQL. This server has both a paid version and a free version that fully covers the needs of the application being developed.

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Fig. 11 Visual studio interface [41]

Integrated development environment The Visual Studio 2012 software was used to create the QASystems system. When choosing an IDE for programming in.NET technology, it has virtually no competitors. Visual Studio is not only for developing web applications but also for developing applications for the entire .NET platform. This software has the advantages of all modern development environments. The interface of this environment is shown in Fig. 11. Client software The client software on which the created system was tested is the Windows 8 operating system and the following web browsers: • • • •

Internet Explorer, Google Chrome, Mozilla Firefox, Opera.

3.2 Programming Technologies and Methodologies The following subsection serves as a description and an introduction to the technologies used. Description of the technologies used in the creation of the QASystems platform is intended to help in understanding how the created system works.

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Programming Languages

The ASP.NET technology allows them to create applications in two programming languages: C# and Visual Basic. In the case of the system developed, all logic was made in C#. However, HTML and JavaScript were used to create the page views.

3.2.2

ASP.NET MVC

Microsoft ASP.NET MVC is a framework for creating web applications based on the popular.NET Framework development platform. The code of the current, fourth version of ASP.NET MVC has been released under the Apache License 2.0 [42], which further helps developers understand the operation of this platform. It is based on the Model-View-Controller design pattern, which is used in many other technologies, not only aimed at creating web applications (Sect. 3.2.6). The greatest advantages of the ASP.NET MVC platform are the perfect separation of the logic, data, and view layers, easy expansion with new elements, and greater possibilities of testing with the use of unit tests. In addition, access to the full range of libraries provided by the.NET Framework makes it a very powerful environment for developing web applications. The principle of operation of the ASP.NET MVC platform Each HTTP request sent to the application goes through several phases before returning to the user an HTML page response or an error if the request is incorrect or the application fails will be able to handle it. The first step is to get the information about what action is to be triggered by request (Fig. 12). For this, routing tables are used. For an example of a routing rule in the RouteConfig.cs file, see Listing 1.

Fig. 12 Routing an HTTP request to the corresponding controller and action [43]

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1: routes. MapRoute( 2: name: 3: url:

" Default", "{ controller}/{ action}/{

id}",

4: defaults: new { controller = "Home", "Index", id = UrlParameter. Optional }

action

=

5: ); ii

Listing 1 Sample of a programming statement After the request is translated, the name of the controller and the action (method) that will be called is known. Optionally, a user will also get an additional parameter. The first two names are used to find the appropriate class and method. For example, if the request received by the application looks like this: http://naszportal.pl/Media/AllPictures The mechanism responsible for routing the requested call will call the AllPictures method in MediaController class. The called method must return an object that inherits from ActionResult, which will then be displayed to the user. There are several predefined classes that return the Content itself, the file, the HTML page, and other elements. The following classes are responsible for returning the appropriate format: • • • • • • • • •

ContentResult—allows returning any content in text form, EmptyResult—represents a result that returns nothing, an empty reference, FileResult—allows the user to return any file as a result of the query, HttpStatusCodeResult—allows the user to return a specific HTTP status code [44], JavaScriptResult—sends JavaScript code [45] as a result. JsonResult—sends JSON code [46] as a result, RedirectResult—redirects the request to another URL address, RedirectToRouteResult—redirects the request to another action in the same application, ViewResultBase—returns a view, then rendered to HTML.

The page that will be displayed to the user may also depend on what the controller method will deliver to the view itself. Data transfer from the controller to view can be done in one of two ways. The first way is to use the ViewBag container, which is a dynamic object, so the user can define its properties on the fly. The ViewBag object is defined only for a single request, so a user has to redefine these properties each time the view is called. The second way to deliver data to a view is to pass it as a model. Thus, it is possible to send an object with a strictly defined type. In the view, a user can define what type of model the view expects, and if the wrong object type is sent, the error will be detected at the compilation level.

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Rendering engines There are two rendering engines in ASP.NET MVC. They change files that, together with the HTML code, contain a special code, allowing for dynamic change of the page value into regular HTML code understandable for the browser. Aspx file rendering engine is known, among others, from ASP.NET WebForms. It allows them to create websites in a similar way to creating desktop applications. The code that can be placed inside the HTML code is very similar to the code of the C# language; each such block must be preceded by the characters “ “. An example of such code is shown in Listing 2. 1: Hello , DateTime.Now.Year %>

the

year

is

6: public

List< string >

7:

public

string

8:

public

int

{ {

get; get;

set; set;

}

{

get;

Circles Tags

{

}

get;

PostType

SearchUserId

{ {

set;

set; get;

}

} set;

}

get; Set;

}

9: }

Listing 6 SearchQuery class, which stores queries to the search engine The sorting method for each post uses a special algorithm to determine the numerical value. Posts with the highest value are considered to be the best matches and placed at the top of the return list. The matching values are calculated using the formula: k l(xi ) × (2t(xi ) + 3a(xi ) + c(xi ) + 0.25(xi )) z = i=0

where: k—number of words in the query, xi—ith word in the query, l (xi)—word length xi, t (xi)—the number of occurrences of the word xi in the subject of the post, a (xi)—the number of occurrences of the word xi in the login or the author’s name, c (xi)—the number of occurrences of the word xi in the body of the post, ch (xi)—how many times xi will appear in the answers to the question Thanks to the use of filtering, the system is able to limit the number of searched posts, while the algorithm used to sort posts tries to select the posts best for the user.

4.4 Design of the User Interface Layer The user interface was created with the razor engine described in Sect. 3.2.2. It is a very good tool for creating dynamic web pages. It combines all the advantages of HTML, CSS, and allows a user to write loops, conditional statements, or more advanced statements using code similar to C#. All .cshtml files containing the user interface are located in the/Views/ControllerName folder. Files usually have the same name as the action that calls them. Besides these files, there are also shared views. An example of such a file is the page interface found in

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file/Views/Shared/_Layout.cshtml. It contains the entire page frame, which is displayed regardless of the action called. It includes things like a header, side menu, footer, and more. Listing 7 shows the shortcode of the page frame. Pay special attention to lines 6 and 12, where razor calls are placed. The RenderPage function from line 6 allows a user to place code from a specific file in place of the call. In this case, it is the code containing the page header together with the search form. The RenderBody method works similarly, except that it does not specify the file that the code should insert because the file depends on the action being executed. It is the result returned from the action that determines what view is inserted into that location. 1:

2: 3: ... 4: 5:

6: @RenderPage("_HeaderView.cshtml") 7:

8:

10: 11:

12: @RenderBody() 13: 14: 15: 16: 17:

Listing 7 Adding a variable to a ViewBag 1:

@ViewBag. SomeText

Listing 8 Referring to a variable stored in the ViewBag The second way to transfer a variable to a view is to determine what type of model the view expects and then pass it as a parameter to the View function. The model can be described as dynamic. Then a user can pass anything to the view, but it will deprive the programmer of hinting at what arguments the model might have. Listing 9 shows sending a string variable as a model to a view. Listing 10, on the other hand, defines what type of model the view expects (line 1) and its use (line 3).

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2: { 3: var

someText

4: return

= "tekst";

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Listing 9 Send the variable as a view model 1: @model

string

2:

@Model

Listing 10 Referencing the view model

5 Description of the QASystems Application The following chapter is intended to familiarize a user with the QASystems interface and to present how to operate this system.

5.1 Logging in and Registering to the System If a logged-in user enters the application’s website, two buttons appear on the left side of the screen, allowing Logging or registration to the system. Logging in will redirect the user to a form where a user can log in using a user’s login and password (Fig. 25). Registration can be controlled by an administrator. If the administrator does not allow new users to register, a warning will appear after clicking on the registration button (Fig. 26); otherwise, a form will appear requiring filling in the most important data (Fig. 27). Both the login form and the registration form have automatic data validation. Thus, browsers that support HTML5 can check the correctness of entered data while typing it, not just after it has been sent. An example of a validation error is shown in Fig. 27.

5.2 Viewing Questions and Answers This section describes how to view queries in QASystems. The application screens show how to filter questions by circles or tags and what information can be obtained by viewing the Content on the system.

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Fig. 25 A screen presenting the login form to the QASystems system. Source Authors own creation

Fig. 26 Screen with a warning about the impossibility of registering to the QASystems system. Source Authors own creation

Home page After logging in to the system, the user can view the posts from the circles he has access to. They will appear on the home page (Fig. 28). On this screen, the following elements are highlighted: 1.

2. 3.

side user menu. From this menu, the user can add new questions, go to view his profile, view available circles, or go to the admin panel, if he has the appropriate permissions, buttons for sorting the question by date, grades or displaying only those questions that do not have any answer yet, the list of the best users from the circles available to the logged-in user, the best rank of the circles is taken into account.

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Fig. 27 Screen presenting the registration form. Source Authors own creation

Question page After clicking on any question, a page opens, on which, according to the rules of the question-and-answer model, at the top, there is a question asked by the user (Fig. 29). Other users can answer this question. On the right side of the screen, a user will find additional information associated with the question. This information consists of the following elements: 1. 2. 3. 4. 5.

information about the author of the question, number of votes cast for the question, along with buttons enabling voting, list of circles to which the question belongs, list of tags assigned to the question, modifications made to the question, along with a commentary on these modifications.

Circle page If a user wants to view posts from the selected circle, the user clicks on the name of the circle in the side menu or on the question page. A screen will then appear with

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Fig. 28 Screen showing the home page. Source Authors own creation

Fig. 29 A screen fragment showing the details of the question asked by the user. Source Authors own creation

only posts belonging to the selected circle (Fig. 30). The name of the circle and its description, given by the administrator, will appear at the top. Additionally, if the user has administrator rights in the selected circle, links to the management panel for these circles are displayed (1). The list of the most active users will be arranged according to the ranking in a given circle.

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Fig. 30 A fragment of the screen showing the list of questions from the selected circle. Source Authors own creation

Tags page The tags page works similar to the Circles page, except that the only information on the screen are questions that match the selected tag (Fig. 31).

Fig. 31 A screen showing a list of questions from the selected tag. Source Authors own creation

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5.3 Adding and Editing Content This section shows a user how to add the user’s own Content to the system. It describes, among other things, adding a new question, answering questions, editing an answer, and advice on how to influence the evaluation of the answer. Creating a question After pressing the “Ask Question” button, located on the side menu, directly under the user’s photo, a user can go to the form to create a new question (Fig. 32). The data needed to create a new question is: • the question, defined so that other users understand the question without going into details, • a more detailed description, if the question requires an additional description, • circles in which the question will be available, • the tags that describe the question. Providing answers The answer form is provided under the question the user wants to answer (Fig. 33). This form is only displayed if the user has the appropriate response rights.

Fig. 32 A screen presenting a form that allows a user to create a new question. Source Authors own creation

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Fig. 33 Screen fragment showing the form to answer the question. Source Authors own creation

Edit the question Users who are allowed to edit posts that are not theirs can edit questions or answers by clicking the “edit” link under the post (Fig. 34). If the user has no rights to edit the posts, a warning will be displayed (Fig. 35). If a user has such rights, the user

Fig. 34 Screen fragment showing the question and the link to edit. Source Authors own creation

Fig. 35 Screen excerpt showing Unable to edit warning. Source Authors own creation

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Fig. 36 A screen presenting a form for editing the question. Source Authors own creation

will be redirected to the page with the form that allows the user to edit the selected post (Fig. 36). After editing, enter the comment, which has been changed. Only then will the editing be included in the original post. Evaluating responses Assessing responses is another example of how the community can help in receiving responses. Any user with the right to rate other people’s responses may only rate each answer once. Assessment is done through the arrow icons to the left of the answer (Fig. 37). The user, who is the author of the question to be answered, has the possibility to choose the best question from among all those given. Choosing the best question is done through the checkmark icon, which is under the evaluation of the answer. This answer will be highlighted by changing the background color to green (Fig. 38).

Fig. 37 Screen excerpt showing an example answer

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Fig. 38 A portion of the screen showing the answer marked as best. Source Authors own creation

Fig. 39 Screen showing the search result for the phrase “java”. Source Authors own creation

5.4 Searching for a Question Searching for a question is described in Sect. 4.3.3. Posts are searched and filtered using a proprietary algorithm. For example, entering the word “java” in the search field will return all posts that contain the word “java” in the subject or body (Fig. 39). The returned results can be subjected to additional filtering by taking from them only questions from, for example, the Programmers’ circle. This can be done by adding “[circle: Programmers]” to the search box (Fig. 40).

5.5 User Data Any user wishing to add additional Content to QASystems must have an account. Users can add information about themselves so that other people can find out more about them. user profile Each user logged in to the system has his/her public profile, which can be seen by other users (Fig. 41). The profile has information such as:

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Fig. 40 Screen showing the search result for the phrase “java [circle: Programmers]”. Source Authors own creation

• • • • •

a photo or avatar characterizing the user, personal information, such as the user’s place of residence or website address, last questions asked by the user, last answers given by the user, a list of circles to which the user has access, along with his ranking.

Editing user data If the user enters his own public profile, a link will appear leading to the page with the form for editing the data (Fig. 42). User can edit his basic data, such as: • • • • •

picture first name and last name, website address, place of residence, a short description of the user.

5.6 Admin Panel The administrator panel allows privileged users to edit system data and manage circles and users. Access to the system administrator panel can only be granted by another administrator. General settings In the general system settings, a user can set a name to be displayed as the title in the browser and in the page header—this way, a user can give the user’s own name

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Fig. 41 A screen showing the user’s public profile. Source Authors own creation

to subsystems based on the QASystems platform. Additionally, there is an option to create a system description and an option to block new users from registering (Fig. 43). List of circles The panel with the list of circles allows the administrator to add, delete or edit the properties of the circles (Fig. 44). User list In the next settings panel, there is a list of users. These users can be deleted or their data edited (Fig. 45).

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Fig. 42 A screen showing the editing of user data. Source Authors own creation

Assigning users to a circle The last functionality in the admin panel is managing user access to the circles. This page has been divided into two parts. The top part lists the circles that are in the system, while the bottom shows the users who have access to the selected circle. The border can be selected by clicking on the appropriate field (Fig. 46).

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Fig. 43 Screen showing basic system settings. Source Authors own creation

Fig. 44 Screen showing the circle management page. Source Authors own creation

5.7 Summary QASystems has been designed so that users can easily navigate through it. All the most important data is always visible and grouped so as not to confuse different contents. Users can create their own public profiles and compete for a position on the list of the most active users. The admin panel helps in managing the most important Content on the portal. The system works properly with all tested browsers.

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Fig. 45 A screen showing a list of all users. Source Authors own creation

Fig. 46 A screen showing the user management page in circles. Source Authors own creation

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6 Conclusions The QASystems platform was created to facilitate communication and exchange of information in large groups. This system was created due to the lack of interest of companies creating systems based on the question-and-answer model for closed communities that do not want their questions to be available to see for a broad public. All existing information exchange systems have their advantages and disadvantages. Nevertheless, systems based on the question-and-answer model have proven themselves as a useful knowledge management system. Thanks to the easy questionanswer model, the system based on it is able to reject invalid answers, promoting at the same time the most useful ones. Unfortunately, all existing systems are only directed at large, open-minded communities. As a result, it is not possible to build specialized systems focused on a single topic for which the question-and-answer model seems appropriate. Taking into account additional functionalities from other information exchange systems significantly improves the system created. The idea of ranking users encourages them to compete while showing appreciation for their efforts. Allowing other users to perform operations such as editing posts or administering circles decreases workloads for system administrators, who do not have to supervise the Content added in the circles. A filtered search makes it much easier to discard unnecessary Content. The technologies used to build QASystems are mostly developed by one company. As a result, the integration of these technologies was quick and smooth. An ASP.NET developer is not forced to configure additional servers or environments because everything gets configured. Unfortunately, the downside of such a system is the maintenance cost. Apache-based applications can be hosted on servers available for free. For ASP.NET applications and IIS Server, a Windows Server is required, which requires a fee to be paid. Therefore, this system may not be very popular with groups that are open to the public, and many companies have paid Windows Servers, so it will be a good choice for them.

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