B2B e-marketplaces mature as shakeout looms

The global B2B e-marketplace shakeout is finally abating after a shaky 12 months which has seen operators in Australia fall like dominoes.

IDC senior analyst for Internet and e-commerce Brooke Galloway said the e-marketplace sector is finally worming itself out of its infancy after testing a range of different business models.

Galloway predicts B2B e-marketplaces will flourish over the next few years and ease buyer and supplier fears of being squeezed. The forecast is for revenues from e-procurement and e-distribution to reach $US66 billion by 2005.

Pointing to the recent mySAP.com marketplace closure she said companies assume that failures or a change in strategy make the sector seem unviable "but the market is dynamic and so are the players who will mature and re-define."

According to Galloway, the most tried and tested models worldwide have been the supplier-driven, electronic distribution sites - like that of Dell and Cisco - used by companies as a direct sales channel with end users, and aimed at enhancing customer service and loyalty.

Secondly, the buyer-driven procurement model - typically used to sell business commodities - has received solid backing from buyer consortiums (such as Corprocure), as the higher the number of stakeholders, the more negotiating power they have to determine unit price while saving on processing cost.

Thirdly, neutral marketplaces which, in their purest form, enable straight transactions between buyers and suppliers have proven popular, because they can deepen trading relationships through a single business connection, and at the same time, let buyers access hundreds of suppliers, she said.

Access to new markets, lower operating costs and improved supply chain management will continue to be the key drivers behind B-to-B e-commerce growth, Galloway said.

For operators, she said the key to success lies in providing a reliable hub and reliable delivery of a range of products to all types of organisations. She added that a venture cannot be based on transactions alone, but on tapping into and providing suppliers with vertical and horizontal revenue streams, also known as "interoperability".

The local industry's biggest downfall, according to Optus' general manager of e-business Noel Hamill, lies in a lack of operating standards to control e-marketplaces.

"Some of the slowness we've seen in this space has been caused by one party being confused over what they're getting out of an e-marketplace," he said.

"Participants need technical standards to adhere to in order to provide the right technology to operate the marketplace and therefore provide the capability to the supplier."

Hamill added that systems integration will be the greatest barrier to all industries entering the e-marketplace game as most companies would need to integrate their legacy systems with back-end financial systems, which always required "huge investments" in both cash and IT resources.

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