The new B2B marketplace: private, thin and fashionable

Do not be sidetracked by short-term budget-cutting considerations, especially in these belt-tightening days. Private and thin B2B...

Do not be sidetracked by short-term budget-cutting considerations, especially in these belt-tightening days. Private and thin B2B marketplace needs should be determined on the basis of your long-term requirements.

Private B2B marketplaces are fashionable; thin business-to-business marketplaces are becoming so, but whichever you choose, make sure you pick the right software for your present and your future requirements.

The design of these new types of B2B marketplace may limit your choice of software. Developing an infrastructure that provides good support for the many-to-many trading relationships that marketplaces facilitate may be expensive at first, but it will prove cost-effective in the long run as it will more easily evolve alongside your requirements.

Market shifts
In the past 18 months, B2B marketplaces have shifted their focus fro: public B2B marketplaces to private ones. Thick B2B marketplaces have been replaced with thin ones. The change in focus is not clear-cut, however. There are many types of implementations of private B2B marketplaces, and there are many possible variations in the thickness, or absence thereof, of B2B marketplaces.
The two types of B2B marketplace can also be interchanged to various degrees.

Two main trends
The shifts to private and/or thin B2B marketplaces are the results of two main trends. First, there is the move away from large public B2B marketplaces, many of which proved immature and over-ambitious. They failed to provide the right mix of services, and to define and attract an audience. (Ovum's report B2B Marketplaces: Opportunities and Risks analyses why some public marketplace business models
"Developing an infrastructure that provides good support for the many-to-many trading relationships that marketplaces facilitate will prove cost-effective in the long run"
Laurent Lachal
failed.)

Operators of large public B2B marketplaces are also victims of the current economic slowdown, as the investor backlash in this sector is rightly making customers more cautious about outsourcing key processes in the short term.

Secondly, and more importantly, as the boundaries between intra- and inter-enterprise processes are becoming increasingly blurred, private and thin marketplaces are becoming more viable. These marketplaces are enterprise-wide solutions for SMEs and departmental (point) solutions for large companies. The price tag is lower and the business case easier to build than for a large-scale public marketplace - as there is generally a specific business problem that needs fixing, rather than a more nebulous enterprise-wide improvement.

One-to-many versus many-to-many trading relationships
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.

Marketplaces support two levels of many-to-many interaction: horizontal interactions between different types of participant in the B2B marketplace (buyers and sellers, for example); and vertical interactions between the same types of participant (sellers, for example). The infrastructure underpinning this design and the functionality that relies on it are quite different from the infrastructure and functionality of a traditional broadcast-type one-to-many model of interaction.

There are many shades of grey between a simple one-to-many design and a full many-to-many one. But one thing is clear: however rich and flexible a one-to-many infrastructure may be, it will not be able to properly support many-to-many interactions (at least not without throwing a significant amount of money and effort at it). On the other hand, you can use a many-to-many infrastructure design to develop strong one-to-many interactions with your partners with a view to later developing a full-blown many-to-many trading environment. Most companies implementing B2B marketplace software usually do just that as part of the ramping up of the activities of their marketplace.

Private marketplaces
The ownership structure of a B2B marketplace and the issue of whether it is publicly or privately owned are not particularly important. The problem is in the actual implementation of private B2B marketplaces. Many stick to a one-to-many model of interaction. As such, they are not B2B marketplaces, but rather transaction- and/or portal-enabled websites. This type of solution is a natural next step away from one-way interactions focused on content delivery to two-way interactions focused on collaboration between the owner of the Web site and its partners, customers and suppliers.

However, many of these solutions will become sufficiently popular to attract the attention of potential partners. Successful private B2B marketplaces will inevitably become public B2B marketplaces. Endorsia.com, a B2B marketplace for branded industrial goods and services, is such an example. Initially set up by the SKF Group to allow its distributors to order online, it has been so successful that SKF opened it up to other suppliers using the same distributors. Other large manufacturers such as INA Holding Schaeffler and Rockwell Automation now own the marketplace.

With a true many-to-many infrastructure design, the transition from private to public is relatively smooth. Those unfortunate enough to have built their private B2B marketplace on a one-to-many model will have to spend considerable time and effort on the transition. Depending on their circumstances, this may put off their potential partners and allow a competitor's private B2B marketplace to be chosen instead.

Thin marketplaces
A thin B2B marketplace is an extension of back-end and front-end systems rather than an independent solution in its own right. Supporters say that the infrastructure and services required to create and/or sustain online trading relationships should rely on and, if necessary, complement the infrastructure and services that are already available in-house. They base their offering on a mix of aggregation and integration technologies targeted at both intra- and inter-enterprise systems.

When aggregating and/or integrating intra-enterprise systems (such as enterprise resource planning and customer relationship management), thin B2B marketplaces are in effect synonymous with private B2B marketplaces.

When aggregating and/or integrating inter-enterprise systems, namely transaction-enabled Web sites and/or portals, they provide an interesting mid-point solution between private B2B marketplaces and so-called thick B2B marketplaces.

This type of solution is a good short-term choice for many companies. FXall, based on technology from Communicator, is a good example of a thin marketplace. It is an electronic trading platform offering 24-hour access to the global FX foreign exchange market, including access to research and straight through processing to a number of banks. Communicator is also involved in the energy and chemical industries.

The main limitations of thin B2B marketplaces are as follows: they usually provide skin-deep aggregation rather than deep integration, mixed with strong authorisation, authentication and single login technology. They also support trading relationships that are mostly one-way between the aggregated/integrated systems, Web sites or portals and those accessing these via the thin B2B marketplace. As such, they may be considered as a type of portal. Finally, many thin marketplace solutions are immature and are custom-built rather than out-of-the-box software.

The breadth and depth of trading relationships that thin marketplaces support do not compare with those supported by so-called thick marketplaces. These are designed to provide a much larger set of services to all marketplace participants. Moving from a thin to a thick marketplace based on many current thin marketplace solutions will require ripping these off and starting again, rather than simply modifying them.

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