There are many alternative names for B2B marketplaces. Digital exchanges, purchasing portals, vertical hubs, vortals and web-based trading communities are just a few. Even people who use the same term often mean different things. The main issue is not in the name, however, but what it represents.
Ovum defines a B2B marketplace as "a business that manages the infrastructure and services required to create and/or sustain many-to-many online trading relationships". We emphasise that business issues are far more important than technology, and the notion of relationship is vital.
B2B marketplaces go much further than EDI (electronic data interchange), which is a technology limited to sustaining existing relationships between a large corporation and its many business partners. They create, as well as sustain, relationships between any number of organisations.
Some B2B marketplace operators may limit themselves to sustaining known relationships, but this is a business decision rather than a technology-based one.
B2B marketplace operators can either be independent businesses or business units of larger organisations. They manage - but do not necessarily provide or implement - the B2B e-commerce infrastructure and services required to create and sustain online trading relationships.
The infrastructure can originate from third-party software vendors, professional service providers and/or marketplace operators acting as marketplace application service
Opting for privacy
The driving forces behind B2B marketplaces have been marked by three clear trends in the last few months. The sector has shifted focus from buyers to suppliers; indirect goods to direct goods; and from public to private marketplaces.
These three trends are intertwined, as suppliers are much more interested in online trading relationships that involve direct goods within the confines of a private marketplace. They perceive private marketplaces to be much easier to interact with than their public counterparts.
The original vision of large public marketplaces being all things to all people has proved to be fatally flawed. The software could not support it and the required services were not available.
The B2B marketplaces envisaged lacked a unique selling proposition, and most players focused on attracting potential buyers. They ignored the fact that participants in B2B marketplaces are likely both to buy and sell, and that B2B marketplace liquidity depends on a carefully managed balance between buyers and suppliers.
The focus on buyers reflected the marketplaces' e-procurement origins. It also reflected the timing of the B2B marketplace "take-off", which happened as B2C auctions became the model of the moment. As a result B2B auctions were over-hyped by vendors as well as by the press and industry analysts.
This, in turn, discouraged suppliers, who feared for their profit margins and were wary of the threat of disintermediation. While small suppliers might go where their customers take them, large suppliers, wanting to control their own destiny, remain neutral towards B2B marketplaces or start B2B marketplaces of their own.
On the user side, the take-off of the B2B marketplace has been extremely slow, with organisations reluctant to shift their offline trading relationships online. The B2B marketplace revolution is more cultural than technological.
The move to private e-marketplaces is not just a move away from complicated, unfocused and immature public e-marketplaces. It is also the result of the natural evolution of three trends that user organisations are much more familiar with:
the transactional enablement of websites; the self-service enablement of business applications; and the Internet enablement of EDI networks.
Enterprise Resource Planning (ERP) systems, for example, enabled suppliers to access accounts payable data and check the progress of their invoices via the Web, a couple of years before the notion of the private marketplace emerged.
It's a similar story for manufacturing systems, which, of course, are at the heart of the supply-chain collaboration challenges that many private marketplaces are set up to address.