Online ecosystems expand new marketplaces

The hype over online trading exchanges is far from over. David Bicknell reports on the latest buzzwords

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

  • Transaction management

  • Catalogue services

  • Content delivery and discovery services

  • Logistics

    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.

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