The hype over online trading exchanges is far from over. David
Bicknell reports on the latest buzzwords
Just when you thought you were getting to grips with
business-to-business e-marketplaces, along comes a new e-business
industry buzzword that could be fresh out of a National Geographic
magazine - ecosystem.
It is no longer enough to announce a marketplace to boost your
share price. Everyone's seen through that fix. If you are not
already considering e-procurement to improve efficiencies and add
money to your bottom line, you just fell behind your
competitors.
So where does "ecosystem" come from? Broadly, it describes the
idea that instead of having a one-dimensional marketplace, that
marketplace can be opened up to connect with other buyers and
marketplaces as part of a wider network.
One of the originators of the idea, marketplace software
supplier Ariba, recently devised a program dubbed Network Connect,
which will enable non-Ariba procurement applications to connect to
a set of e-business services. It says it is "opening the Ariba
platform and ecosystem to any application".
Ariba, which unveiled its thinking at its user conference last
month, also introduced two more terms to the lexicon of
e-business.
The first, "services" includes a series of "optional extras"
that are now available when you go down the marketplace route.
Examples include:
- Directory and registration services
- Content delivery and discovery services
The other is "liquidity". You cannot have a marketplace if the
number of sellers does not equate to a similar number of buyers.
Marketplaces become "liquid" when there are so many participants
and transactions that no one part can control or manipulate prices,
processes and information and all companies can participate
equally.
You might have thought there would be general consensus in how
liquidity and services go together. Not so. Some believe there has
to be a trade-off between the two.
For example, Roberta Kowalishin, vice-president at commodity
chemicals exchange Chematch suggests that if you do not concentrate
on ensuring the liquidity of an exchange, it does not matter how
many services around the exchange you offer. But Ariba's chief
executive Keith Krach, believes that tailored services are what
will drive business to the site in the first place.
About a year after exchanges and marketplaces caught businesses'
imagination, a number of key issues still remain to be
resolved.
The sheer explosion in numbers is one of the key concerns.
Another is ensuring that back-end integration for members of an
exchange or marketplace is effective. Yet another involves
staffing. For many marketplaces, the neutrality of who is leading
them is going to be critical.
Then there is the rise of "private exchanges" where key
organisations - Volkswagen is perhaps one of the most visible -
decide to go their own route, rather than joining a high-profile
marketplace. In this case, Volkswagen has spurned Covisint, the
giant General Motors/Ford/Daimler-Chrysler consortium, and ploughed
its own furrow. In another example, Exxon has so far avoided
courting from the Chevron-Texaco set up PetroCosm, and its rival
TradeRanger, backed by BP and Shell.
Despite the concerns of naysayers, who warn that many of the
thousands of marketplaces now being created are unsustainable, and
are certain to be rationalised as some fail through having an
unsustainable business model, or technology failure, Krach remains
unconvinced. "The other week I was in the Far East for a customer
forum. We expected 200 attendees - we had 1,700. And there is a
huge untapped marketplace out there," he says.
According to Miguel Milano, chief operating officer of Spanish
company Telefonica, currently, in Latin America alone, only 1% of
transactions go over EDI, against perhaps 50% in other countries.
"Latin America is ripe for the benefits of B2B," he says.
Perhaps the biggest area, however, continues to be back-end
integration. Petrocosm admitted that it was now thinking of
operating as an application service provider for suppliers, simply
to service those who have so far not adopted any ERP software for
their back-end processes. Given the complexity of putting in
programs such as SAP etc, such companies are only likely to be
implementing a "light" version. Which of the competing ERP
suppliers - SAP, Oracle, or JD Edwards - that Petrosocm might
partner with has yet to be determined, but talks are already
underway.
It all suggests that if you thought that 2000 was the year of
marketplaces, and 2001 might bring another incarnation of
e-business to follow supply-chain and customer relationship
management, you might have to think again.