University at Buffalo - The State University of New York

Published: March 20, 2008

By KEVIN FRYLING
Reporter Staff Writer

Amazon, eBay and Netflix are just a few of the many Internet companies that have become household names during the past 10 years. But a UB researcher who studies high-tech business says it wasn’t long ago that no one could imagine a multibillion dollar industry completely supported by an intangible infrastructure of computing power, storage space and fast downloading speeds.

The Internet marketplace is so new, says Sanjukta Das Smith, that very little information is available to help answer some of the most basic questions that online retailers face.
PHOTO: NANCY J. PARISI

Sorting out the economic and technological implications of this brave new world of online commerce is the goal of Sanjukta Das Smith, assistant professor in the Department of Management Science and Systems, School of Management.

“My focus has been mainly on economic issues of information systems,” says Smith, who joined the UB faculty last fall. “There weren’t too many people working in this area (economic issues of computing resources) when I first got in on it—you’re talking about a brand new market for which there is no precedence.”

Because the Internet marketplace is so new, Smith says very little information exists to help answer some of the most basic questions that face online retailers. What is a fair price to charge third parties for online server and storage space, for example? Or, how do consumers’ habits change as they grow more familiar with certain forms of online selling?

These problems are central to research projects on which Smith is working. The first is a question facing the online giant Amazon, which rents out storage space to start-up companies using its “Amazon S3” service; the other involves forecasting changes in consumer spending habits on eBay as online shoppers grow increasingly experienced with online bidding.

“There are a lot of start-up companies that deal with digital media, such as photo-sharing Web sites,” she says of the storage space pricing project. “So instead of having their own servers, through which people upload these photographs, they’re renting server space from Amazon. Basically, they’re acting as the go-between—they’re customers of Amazon and they, in turn, have their own customers who are using this space.”

Using an economic model inspired by combinatorial auctions, in which items grouped into lots attract higher bids than those sold individually, Smith says she’s seeking to hit upon the optimal price tag for renting out server space—despite the lack of pre-existing data on the subject.

“An auction mechanism works well under these circumstances because you’re not making any assumptions about supply and demand in the market,” she explains. “You’re just looking at the ‘bidder’s’ specific demands.”

Also of interest to Smith is a business that is just learning to navigate the online marketplace—the film industry. In order to counteract the threat of piracy, she says film studios must learn to adjust traditional business models to accommodate moviegoers who are largely ethical, but still turn to illegal downloads to catch new releases from the comfort of their living rooms—or laptop screens.

“You have basically one channel of distribution cannibalizing the revenues of another channel,” she says of the current situation. “When I first started working on this topic in 2002, the concept of releasing movies online wasn’t all that popular. Now, you’re beginning to hear a lot more about it.”

She points out that the impact of file-sharing on the music industry is playing a large part in shifting attitudes. While music and movies are both “experience goods”—meaning consumers only place a value on the product after they watch it or listen to it—she says the unique “if-you’ve-seen-it-once” nature of film means moviemakers stand to lose even more than recording artists if online distribution models are mishandled.

“You can’t just take the same logic—the same arguments—that are relevant to the music industry and apply them straight away to the movie industry. It just won’t fly,” she says. “Music, you listen to over and over again; movies, unless you’re talking about a classic, you usually just watch once. That’s a big difference.”

The recipient of a master’s degree in management systems from Clarkson University and a doctorate in operations and information management from the University of Connecticut, Smith says ferreting out such “quirks and idiosyncrasies” in emerging business models is what first sparked her interest in creating programs to predict the future of online commerce.

“I enjoy the challenge—the puzzle-solving or problem-solving part of programming,” says Smith, who also holds bachelor’s and master’s degrees from Calcutta University, her hometown university in Calcutta, India. “And there’s a little bit of instant gratification involved in it as well,” she adds, noting that this is what initially got her interested in the field of MIS and that interest has been sustained because research is after all a form of problem-solving.

Smith is teaching three classes this semester—an undergraduate and graduate course on IT project management and a graduate seminar on decision support systems—as well as working to establish new research projects at UB, including collaborations with School of Management faculty members H.R. Rao and Ram Ramesh. She also is wrapping up a project with a colleague from UConn, UB alumnus Ram Gopal.

“There’s a nice sort of exchange between UConn and UB,” Smith says. “Two professors at UConn are graduates of this department. I’ve heard great things about the people here from the people at UConn—you don’t always get that sort of endorsement coming to a new department.”

Smith lives in Williamsville with her husband, Ted Smith, an operations manager for United Technologies, who has relatives in the region.

“A couple of my husband’s aunts are here in the Buffalo-Rochester area,” she says. “And we like the fact that Toronto is literally only two hours away.

“We’re really looking forward to exploring this place more in the summer when the weather is nice,” she adds, “especially the waterfront region.”