Post on 05-Apr-2018
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B2B Overview
Business-to-Business (B2B) Overview
Developing a B2B Presence
Plan for Action
B2B Marketplaces
Marketplace Expansion Strategies
Keys to B2B Success
The Future of B2B
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The second Int ernet
revolution consists of
equal parts threat
and opportunity.
Business-to-Business (B2B) OverviewThe global e-commerce revolut ion is entering a new phase. While the fir st stage w as
fueled by the vision and innovation o f business-to-consumer Int ernet companies,
the next phase wi ll be defined by t he leadership and market success of companies
engaged in business-to business or B2B e-commerce. This refers to electron ic
transacti ons between and among companies and their employees and suppl iers.
The early consumer-focused, e-commerce winners created the Internet business
model, but it will be their business-to-business (B2B) successors that realize the full
potent ial of the new electron ic economy.
From the perspecti ve of today's enterprise managers, th is second Internet revolut ion
consists of equal parts threat and opport unit y. The new B2B wave wi ll split most
industries' competitive field into two camps - the prepared and the unaware. Many
organizations, reluctant or unable to init iate t he deep change that the new business
climate requires, have made only minor t echnical changes so far. These changes
modify their culture or business processes. These organizations have yet to make the
investment in the strategy, people, and money necessary to survive in the B2B
e-commerce world . Those who fail to address the oppor tunit y at hand risk
becoming displaced by more forward-thinking competitors.
For t hose who do respond to the new realit ies of B2B e-commerce, the wor ldw ide
B2B market of fers opport uni ties on a grand scale. Sti ll in it s inf ancy, B2B
e-commerce is already the f astest grow th area in the Internet economy and carries
pot ential almost beyond measure. A Boston Consult ing Group report estimates that
Internet -based electronic business relationships wil l account for $2.8 t rill ion in sales
by 2003. Gartner Group places th is fi gure even higher at $7.2 tri llion.
But although helpf ul in sizing t he grow th of B2B Internet sales, such projections of
transaction volume give a false impression of the future importance of the
e-commerce market. M ore import ant than volume, from a business-to-business
perspective, is value. Today's volume projecti ons only hint at t he value that t he
Internet wi ll provide in the years to come as an enabling technology for e-business.
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Participation in the
new economy means
very different t hings
to diff erent selling
organizations.
Businesses have three choices in how they prepare for the coming B2B storm: (1)
they may ignore the t rends and leave their organizations unchanged; (2) they maytake half -hearted steps to adapt f or Internet business, superf icially altering t heir
organizations but leaving their core processes unchanged; Or (3), they may
recognize the t remendous opportunit y off ered by t his paradigm shif t, t ransform the
way they serve their customers, and ensure their f uture in t he digi tal age.
Developing a B2B Presence
The rise of Internet-based electronic commerce has changed the global business
landscape forever. Aft er a f ew years of explosive growt h in the w orldw ide adoption
of web technology, business leaders have completely changed t he w ay theyperceive online technology. Once seen as an unf amiliar and t hreatening medium,
the Internet has proven it self as a superb environment fo r commerce. In t oday's
fast-paced compet it ive atmosphere, no B2B supplier t hat lacks a strategy t o conduct
sales and operations over the Internet may be considered a l eader.
Organizations that move decisively and int elligent ly int o w eb business can register
significant competitive gains. These gains include increased revenue, lowered costs,
new customer relationships, innovative branding opportunities, and the creation of
new lines of customer service. Sellers who f ail t o gear up fo r t he coming B2B
e-commerce explosion w ill not only pass up t hose oppor tunit ies, but in many
industr ies will find their very survival t hreatened. As their customers and
competitors outpace them, they will slide further into irrelevancy.
How can suppliers ensure t heir p lace in t he B2B Internet revolut ion? Participat ion in
the new economy means very dif ferent things to dif ferent selling organizations.
Generally speaking, t he most important requirement s fo r sellers seeking t o push
their business ont o the Internet are a to tal commit ment to success, recogni tion of
the infrastructure challenges involved, and an intelligent plan of action.
Commitment
Whether your organization sells of fi ce suppl ies to mult inat ional companies or
provides specialized consult ing services to a handf ul of clients, strong commi tment
is a prerequisit e for engaging in Internet business. If the web is to be central to the
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The key to success
onlin e is the creation
of a digital
infrastructure that
is tightly int egrated
wit h t he companys
physical inf rastructure
way any company operates, the effort to gear up for e-commerce and an Internet-
enabled value chain must be understood and accepted by key functional areaswi th in your organization, as well as by executive management. This is true fo r
sellers large and small, highly centralized o r di str ibut ed along several cont inent s.
This commitment is necessary because each incremental advance down the path of
web-enabled commerce carries deep imp lications fo r business processes and
organizational cult ure. Company leadership must be wil ling to commit t he resources
in the people, money, and focus necessary to carry the e-commerce deployment
through to fulfillment. Line managers and employees must embrace new tools for
int ernal communicati ons, sales processing, and customer f ulf illment.
At every level of e-business adopt ion, organizati ons must evolve and adapt to new
ways of working and delivering customer value. The new processes and
responsibilities required by world-class, B2B e-commerce are demanding;
management cannot easily f orce their creation and execut ion. Establ ishing
leadership in t he new economy requires company-wide commitment . The
commitment t o adapt and transform must be built into all levels of the
organization.
Understanding Digital Infrastructure
Suppl iers seeking t o make the web a signi fi cant plat fo rm f or sales and order
fulfillment must gain an understanding of e-commerce infrastructure requirements.
These inf rastructure challenges are frequentl y misunderstood, and of ten
exaggerated, by new deployers of Internet business solut ions.
Sellers are already famil iar w ith the physical inf rastructure that allows them to
deliver their goods or services to their customers. Elements of this physical
inf rastructure i nclude sto refront s, processing centers, and t ransport ation f leets.
What is less famil iar to new ent rants to the electronic economy is the digit al
infrastructure of business - the combination of internal applications, network
connectivity, online presence and web-based customer fulfillment that allows
companies to track and satisfy a customer's total experience.
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The Internet is creating a paradigm shif t in B2B commerce, a transformat ion that
enables new business processes and improves upon exist ing ones. The key t o onl inesuccess is the creation of a digital infrastructure that is tightly integrated with the
company's physical infrastructure. Establishing the right flow of information links
the organization's digital and physical infrastructures, providing target elements of
the company w ith data about all aspects of the acquisition decision, including order
fulf illment, payment, and customer support .
Plan for Action
Under pressure t o perform in a new, un famil iar arena, many companies sacrif ice
strategy to urgency. These init iati ves fail because of a lack of fo rethought. By nottaking the time to carefully assess the market , companies somet imes fail t o realize
where the real areas of opport unit y lie in t his new economy.
Many sellers are already well down the path of transfo rming their business
processes and implementing the necessary infrastructure for their e-commerce
operati ons. These companies may already have found t heir ent ry poin t i n t he new
digit al economy and are concentrating on expanding t heir operations or improving
their business resul ts.
Other B2B players have not yet begun t o address the challenge, and face the need
for a much more concerted and far-reaching deployment to integrate t he web in to
their customer communication and transaction processes. Regardless of their
deployment stage, however, e-commerce ventures success or demise depend on the
quality of their conception and execution.
Each supplier's specific strategy, objectives and technical infrastructure for e-
commerce will be shaped by variables that include the suppliers size and scope,
market pressures, industry focus, and available resources. Management must
develop a coherent course of action that is both feasible and appropriate to the
company's overall sit uation.
It is also criti cal t o ensure t hat the organization' s e-commerce strategy contains bot h
a short -term and long-t erm perspective. For companies lacking a quality presence
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Suppl iers shou ld d evelop
an e-commerce action
plan that is appropriate
fo r th eir size, competi ti ve
sit uation , industry f ocus,
and available resources.
online, rapid t ime to market i s essential; these organizations should seek the
execution path that allows them access to business results quickly.
But the velocity of change online demands that companies also plan for the future,
whether that be six months or three years down the road. The action plan for
e-commerce deployment is never completed. It is best thought of as a living
strategy, one that w ill evolve to f it the organization as its requirements and
capabilities grow over time.
Suppl iers should develop an e-commerce acti on p lan that i s appropriate for their
size, competitive situation, industry focus, and available resources.
B2B E-Marketplaces
Online markets, also known as B2B marketplaces, are commerce sites on the public
Internet . These e-marketplaces allow large communit ies of buyers and suppl iers to
" meet" and t rade wit h each ot her. They present ideal st ructures fo r commercial
exchange, achieving new levels of market efficiency by tightening and automating
the relationship between supplier and buyer.
They allow part icipant s to access various mechanisms to buy and sell almost
anything, from services to direct materials. The extreme flexibilit y of these
marketp laces, which may be customized to serve the full suppl y chain of vir tually
any industry, will establish themselves as pillars of the new B2B e-commerce
economy.
Ultimately, all businesses will buy on a marketplace, sell on a marketplace, host a
marketp lace, or be marginalized by a marketplace. For organizations commit ted t o
part icipating in t he coming w ave of online business, B2B marketp laces of fer a
compell ing ent ry point int o t he new economy. As e-commerce becomes more
central to t he operat ions of mainline companies, a diversit y of marketp laces wi ll
arise in every sector .
So far, most of the early movers have been small, aggressive third-party, dot-coms
seeking first-mover advantage, which they hope to leverage into market
dominance. But they will not have the playing field to themselves for long. Already
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the establ ished bri ck-and-mortar players are moving t o leverage their existi ng t rade
relationships and access to buyer liquidity into established B2B marketplaces.
B2B marketplaces are redefin ing how businesses int eract wi th each o ther.
Inevitably, all businesses wi ll be af fected by t his revolut ion. The important question
that all companies must answer i s: " How?"
B2B E-Marketplaces and Supply Chains
Marketplaces and exchanges are emerging to serve each point of every industr y's
supply chain. Whether it 's a spot market to clear excess raw materials in t he metals
industry or a new " virtual" dist ributo r in t he lif e science chemicals industry, these
electronic markets bring buyers and suppliers together through new methods of
dynamic collaboration and t rade. They remove costl y inef fi ciencies and deliver
bottom-line savings to all participants.
Alt hough sti ll in t heir inf ancy, B2B marketp laces have the pot ential to d rive the B2B
e-commerce revolut ion. By virtue of their structure, which unites member
companies in seamless trading communities of common business interest, B2B
marketplaces maximize speed and efficiency. They offer buyers and sellers uniquely
pow erfu l f orums to reduce transacti on costs, enhance sales and di str ibut ion
processes, del iver and consume value-added services, and streamline customer
management.
Evolution of E-Commerce Mechanisms
To understand t he step forw ard that B2B marketp laces represent, i t is useful to
examine t he progression of electronic business. A brief review of the rapid
evolution of B2B e-commerce helps set the context for B2B marketplaces:
EDI/ERP
EDI (Electronic Data Interchange) and ERP (Enterprise Resource Planning)
Businesses wit h w ell-defined t rading relat ionships use EDI and ERP to create
point -to-point interf aces wi th each ot her
Expensive to implement , outside the reach of all but the largest companies
Businesses wit h w ell-
defined trading
relationships use EDI
and ERP to create point-
to-point interfaces wit h
each other.
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Useful for transactions involving replenishment orders for direct production
goods tied to a previously negotiated contract.
Sell-Side Storefront
Primary model used in current business-to -consumer scenarios
Single seller, typically a distr ibut or, const ructs a web sto refront to sell t o
many consumers (i.e. Amazon.com)
Unless a single distr ibut or can aggregat e all t he suppl iers in a given
industry, the buyer remains responsible for comparison shopping betw een
stores
Expensive for buyer and does not meet t he needs of corporate procurement
organizations.
Buy-Side E-Procurement
Buy-side applications generally consist of a browser-based self-service front
end to ERP and legacy purchasing systems
Corporate procurement aggregates many supplier catalogs into a single
" universal" catalog and allow s end-user requisit ioning f rom the desktop,
facilit ating standard procurement fo r the organization and cutt ing dow n
on " maverick" purchasing
Purchases made t hrough this system are linked to t he back-of f ice ERP or
accounting system, cutt ing time and expense from the transacti on and
avoiding pot ential bookkeeping errors
Model yields reduced transaction costs but not lower purchase costs; no
impact on size of suppl ier base, no enablement o f dynamic trade; buying
organizations must set-up and maintain catalogs fo r each of their suppliers;
too costl y and t echnically demanding f or most small and medium-sized
businesses.
B2B Marketplace Latest evolut ion of B2B e-commerce, enabling a many-to-many (M:M)
relationship betw een buyers and suppl iers
Buyers and suppliers leverage economies of scale in their trading
relationships and access a more " liqu id" marketp lace
Sellers fi nd buyers fo r t heir goods, buyers find suppliers wi th goods to sell
Many-to-many liquidit y
allows the use of dynamic
pricing mo dels such as
auction s and exchanges.
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Many-to -many liquid ity allows the use of dynamic pricing models such as
aucti ons and exchanges, furt her improving t he economic eff iciency of t hemarket.
Marketplace Requirements
As the new B2B trading hubs, market places must enable certain processes and
enterpr ise t rading requirement s. They should accommodate existi ng procurement
processes and buyer-supplier interactions, and offer full interoperability with other
markets.
Procurement Processes - Procurement p rof essionals conf igure a " virtual
procurement system" within B2B marketplaces. This replicates the buyers' unique
procurement process down to individual permissions, rules and workflow, allowing
the p rocurement organization to contro l t he overall buying process wh ile
distributing the buying task to end users.
Buyer-Supplier Relationships - Before moving to a marketp lace, most buyers and
suppl iers wi ll have existing relationships that must be reflected i n t he marketplace.
Suppliers can confi gure t he system t o ref lect pre-negot iated discount s fo r certain
buyers, wh ich wi ll aut omat ically be applied when those buyers access the
marketp lace. This many-to -many marketp lace combines the advantages of bot h
sell-side and buy-side models, but since it is hosted, avoids setup and maintenance
costs for the participants. Significantly, this can allow access to smaller organizations
that would not otherwise have had the resources fo r B2B trade online. Both buyers
and suppl iers gain the advantage of a much broader trading communi ty. Both sides
can also enjoy the benef it s of a streamlined t rading process.
Interoperable Marketplaces - One of the key factors in building a successful B2B
marketplace is to focus on meeting all of the buying needs of the target user.
These needs may go beyond the specialist capabil it ies of any sing le marketp lace. To
cater t o broader buying requ irements, therefore, marketplaces may link t o each
other, eff ectively extending the product range wit hout giving up " control" of the
buyer.
The ability of marketplaces to interoperate extends the idea of liquidity and
network effect by joining more buyers with more suppliers, but does not sacrifice
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the abilit y of each marketplace to be highl y specif ic to t he supply-chain node or
target buyer group it serves.
Benefits of B2B E-Marketplaces
Sellers, buyers, and market makers each stand t o benefit f rom the B2B
marketplace.
Sellers use B2B e-commerce to lower costs and access new customers.
Marketplaces extend t hat reach sti ll f urt her by creating and leveraging close
collaboration between t rading partners, tight ening the relationship
betw een supplier and buyer, promot ing price discovery and spend
aggregation and slashing supply chain costs. Buyers can use B2B marketplaces to reduce direct and indirect supply chain
costs by leveraging t heir global scale, focusing their spending on preferred
suppliers, and taking advantage of dynamic models such as auctions and
bid-quote for efficient sourcing and spot buying. Beyond leveraging spend,
new tools for logistics, payment and tax create new opportunities to build
t ransparency in t he supply chain, decrease log ist ics costs, increase inventory
turns, and improve the overall performance of the manuf acturing and
procurement processes.
Market makers are the fulcrum of these new B2B e-commerce relationships,
catalyzing t he grow th of the B2B economy by leveraging their domain
expertise, customer relationships and supply chain strength to f uel t he
growth of B2B marketplaces. In return for delivering incredible value,
market makers stand poised t o reap substant ial rewards by sharing in t he
returns achieved by buyers and suppliers.
Marketplace Characteristics
It is important t o understand the principles that underlie B2B marketplaces and
determine the shapes that t hey assume under the pressure of time and competit ion.
Every market, w hether onl ine or no t, represents a complex assembly of buyers and
suppl iers unit ed by int ricate lines of pow er and dependency. Although forces of
suppl y and demand cont rol the flow of business, each market carries a buil t-in
measure of inef fi ciency. The B2B marketplace minimizes that inef fi ciency by
Both buyers and
suppliers gain t he
advantage of a much
broader trading
community..
Every market w hether
online or not , represents
a complex assembly of
buyers and suppliers
united by intricate lines
of power and d ependency.
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tigh tening the relationship between supplier and buyer, promoting p rice discovery
and spend aggregation, slashing supply chain costs, and increasing the reach ofsuppl iers. If enough l iquidit y is buil t int o t he system, B2B marketp laces are the
ultimate trading structures - the closest thing to a perfectly efficient trading system
ever developed in t he long h istory of commerce.
Buyer liquidit y - the crit ical mass of transacti on volume that is the lifeblood o f every
market - is essential to electronic exchanges. With so much speed and capacity, the
B2B marketp lace is the ideal technological platf orm fo r commercial exchange.
Without enough buyers and suppliers on t he network, or enough tot al purchase
volume, the marketplace cannot capitalize on its potential for efficiency; it would
be bound by t he same inef fi ciencies as old-world exchanges.
Marketplace Expansion Strategies
Electronic marketplaces create value for part icipants by playing th ree roles:
connector, value-added service provider, and spend aggregator . The in it ial value
proposit ion o f every marketp lace lies in t he connecto r role, serving as the common
platform over which trading companies route information and transactions. To
become a value-added service provider, B2B marketplaces must provide access to
services ranging f rom baseline interoperabilit y and directory services to specialty
services, such as online payment, logistics, and dynamic trade. Many marketplaces
also take on the role of spend aggregator, negotiating lower prices for buyers by
leveraging collective volume.
The early stage of marketp lace development focuses on establ ishing enough basic
capabilit y and buyer liquidit y to make the market competitive.
In nearly all cases, markets start out wi th a narrow range of products and services
and target either a product category or a buyer group. As they grow, they must
expand f rom th is sharp f ocus to support a broader base of buyers and suppliers.
B2B E-Marketplaces and Exchanges
A product-focused B2B marketp lace may develop w hen a product or f amily of
products is purchased across multiple industries (e.g., steel, PCs). Product-focused
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marketplaces typically serve industries in which extensive buy- and sell-side
fragmentation makes it difficult for the players to achieve price and productdiscovery independently. That fragmentati on, and the resulti ng natural f riction in
the market, makes these industries ideal candidates for B2B marketplaces, which let
them drastically cut down on volatile and uneven pricing, improve information
access, speed up transaction cycles, and slash transaction costs.
A buyer-focused, vertical B2B marketplace emerges to serve the product needs of a
part icular group of buyers (i.e. Chemdex, which f ocused in it ially on serving scient ists
in the life sciences industry). Buyer-focused marketplaces deliver the same benefits
and are structured along t he same lines as product-focused market s, and typi cally
adapt over time to serve more categor ies of buyers.
The division betw een product- and buyer-focused marketplaces is sharpest fo r early
entrants. As markets grow , they must become more inclusive and functional to
survive.
Procurement Portals
The newest example of the elect ronic B2B marketp lace is the procurement port al, in
wh ich the market maker leverages deep relationships wi th small and medium-sized
buyers to create an exchange. In th is model, t he market maker of fers value to the
exchange members including l ower pricing dr iven by it s own spend consolidation
and access to new customers and suppliers while enjoying a range of special
benefits.
The procurement portal becomes a powerful p latf orm t hrough which the host can
extend brand, of fer value-added services, and st rengt hen relat ionships with
customers.
Companies with the strong competitive positioning and customer relationships to
create and populat e a procurement portal gain access to a unique range of
opport unit ies. If leveraged intelligently, portals open the door t o signif icant grow th
in the company's sales, service, and supp ly operat ions. It uni tes companies in a
trading communit y of common interest driven by the market maker, who realizes
As markets grow, t hey
must become more
inclusive and f unctional
to survive.
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substantial secondary business benefi ts from t he endeavour, including branding
opportunit ies and increased exposure to potential customers.
Keys to B2B Success
Every enterprise's value chain may be enhanced through business-to-business
e-commerce. While t he det ails of a company's e-commerce action plan must reflect
its broader compet it ive sit uation, almost all companies wi ll share several high-level
objectives. How an organization goes about targeting these goals will determine
the success or f ailure of it s Internet init iati ve.
Increase Revenue and Lower Costs
The ult imate goal o f every e-commerce expansion is to achieve bot tom-line,
measurable result s to increase revenue and reduce expenses. If w ell executed, a
web strategy allow s businesses to accomplish this at several levels.
Aggressive web-enabled businesses gain new revenue from multiple sources,
including acquiring new customers and increasing business from existing customers.
By expanding into the online medium, a supplier grows its universe of potential
trading partners tremendously. And by developing a complete onl ine business
solut ion, t he seller can gain increased revenue f rom existi ng technology-enabled
customers that p refer to do business th rough e-commerce.
Suppl iers low er their operating expenses by taking advantage of the web's unique
abilities to communicate and process transactions. By implementing new processes
that automate f unctions long performed by salespeople or support staff - for
instance, not if ying customers of their order stat us - they register impor tant savings.
Find Partnerships of Opportunity
The right partnership strategy can allow a seller just entering t he onl ine space to
accelerat e tow ards a world -class business presence, or help an established
e-commerce player expand into new markets and services. It is neither necessary nor
advisable for companies hoping t o tap the flow of B2B e-commerce to go at i t
alone. The alliance concept is alive and w ell on the Internet , where the special
capabilit ies of the onl ine medium can make such relati onships especially
The ult imate goal of every
e-commerce expansion is
to achieve bottom-line,
measurable r esult s.
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advantageous. Simply by selecti ng t he righ t t echnology and marketp lace partners
many of whom of fer access and services at low cost suppl iers can take a giantstep towards true e-commerce enablement .
Sellers seeking t o f ast -track their web plans should seek partnerships of oppor tunit y
alliances wit h other companies that allow them to quickly develop. Part nerships
help sellers rapidly deploy e-commerce solutions and gain access to buyer
inf rastructure, services, and access to new customers. Pursuit of this st rategy may
mean joining a B2B marketplace, an electronic market on the publ ic Internet t hat
brings together buyers and sellers into a seamless trading community. These online
marketp laces allow sellers to gain b road access to buyers and develop new, high ly
efficient lines of trade. Or it may mean selecting an ASP (Application Service
Provider) that wi ll provide hosted access to t he applications the organizati on
requires to conduct its e-commerce solution. For suppliers of small size and limited
resources, web communities exist that offer basic e-commerce infrastructure,
including hosting and transaction management.
Seize First Mover Advantage
Suppliers who move quickly to establish effective electronic business presence put
themselves in a posit ion of strength. Those who adopt a wait -and-see approach,
hesitate too long over infrastructure decisions, or who are too tentative in
execution, run the risk of being passed by. Internet business is characterized by its
rapid pace and in tense compet it ion. Once a compet itor has fallen far behind, it can
be too late to catch up. Time-to-benefit is directly correlated to the speed at which
a suppli er establishes its B2B e-commerce presence. Rapid t ime-to-market is an
essenti al component to every e-commerce rollout .
Create the Right Digital Infrastructure
Even small or medium sized B2B suppliers should not consider infrastructure an
obstacle to the development of an electronic market presence. In many w ays, it is
easier than ever before for such organizations to gain early-stage access to the
benefi ts of e-commerce and to an Internet-enabled supply chain. The last few years
have seen remarkable evolut ion in web hosti ng, dynamic elect ronic marketplaces,
and applications that process and route sales information. These are the essential
building blocks of e-commerce infrastructure, assuring the organizati on's abilit y to
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establ ish connectivit y, put product or service inf ormat ion online, access a broad
range of customers, process transactions and fulfill orders.
Successful e-commerce demands the right alignment of human assets and
technology elements, working together to support all phases of the customer
experience: selection, purchase, delivery, and support.
Selection - Customer review of key product and service information prior to the
purchase decision. This function is best served by a well designed web site that
contains a complete range of info rmation t o guide t he customer t hrough t he
decision-making process.
Purcha se - Sales transaction and processing. This requires a tracking solution that
routes information to all functional groups needed to complete customer orders.
Delivery Fulfillment - This should also include a customer response capability to
keep end recipient s apprised of order stat us.
Supp or t Customer Serv ice - Often the forgotten element of e-commerce, support
can be a make-or-break proposition in B2B, which is far more sensitive to service
issues than B2C. From an infra-structure standpoint, this need is served through a
web presence that places technical information and access to customer service
information company representatives.
Create a Single Point of Access to All M arkets of Opportunities
Sellers want to get their products and services in front of as many customers as
possible, while minimizing t heir online investment of t ime and resources. To achieve
th is goal t hey should t ry t o join a system of int erconnected B2B marketplaces. By
using common data standards, these electronic marketplaces allow suppliers to
maintain t heir product and service info rmation at a single online location w hile
part icipating in several market s.
Maintaining mult iple point s of online product inf ormation forces a seller to do
expensive work in several places updat ing prices and inf ormat ion, eliminat ing
dated cont ent and managing customer data. This extra commi tment leads to costly
errors, drains money and time resources, and potent ially makes the organization
less responsive and customer-focused. Participation in a global network of
Partnerships help sellers
rapidly deploy e-commerce
solut ions and gain access
to buyer infrastructure,
services and access to new
customers.
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B2B Overview 15
int egrat ed B2B market places helps sellers gain tact ical advantage and access to a
virtually unlimited stream of buyer liquidity, maximizing the return on theirinvestment in eff ort and money.
Exploit Branding and Customer Personalization
Online business of fers a special range of opport unit ies fo r branding and customer
personalization. Both encourage customer loyalty. B2B marketplaces let sellers
access many customers, wh ile maintain ing one point of product and service
information.
The high cost of customer acquisition demands that o rganizati ons focus on
retaining existing customers through innovative branding and personalization
init iati ves. Maint aining brand identi ty on the web can be a challenge for B2B sellers.
Buyers have easy access to so many competing suppli ers that product and service
of ferings can be reduced to a commodit y presence, if aggregated. Build ing a high-
quality, distinctive web site, particularly one that is enabled for integration via
standards such as Commerce XML (cXML) to interact with network-based
e-commerce purchasing solutions, can dif ferent iate suppl iers online by maint aining
their brand identity and competitive differentiation.
Build Buyer Power
Building buyer power is the single most important element to establishing market
cont rol. Buyer pow er refers to the f low of transaction volume that market makers
can drive through their B2B marketplace. For single companies wi th enough present
purchase volume to qualify as the dominant player in the market, or fo r a
consort ium of major buyers able to aggregate their spend, buyer pow er represents
a potent ially unbeatable weapon in t he struggle to edge out rival market makers.
Companies that achieve market -leading buyer pow er are able to bind a commun ity
of suppliers and smaller buyers fi rmly t o t heir B2B marketp lace.
Cater to Buyer Behavior
Understanding how the market operates presently is crit ical. What preferences do
buyers have around issues like business standards, suppli er t erms, and vendor
Online business offers
a special range of
opportunit ies for
branding and customer
personalization.
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B2B Overview 16
assurances? What value-added services are in demand in the market, and which can
be realisti cally support ed over the exchange platform? Buyer behavior of fersanother leverage point in t he st ruggle to establ ish B2B marketp lace ownership.
Enable Technology
The B2B marketp lace model relies on light , client-side t echnology buyers and
suppl iers must be able to do business over the site th rough a standard browser t hat
facilit ates buyer/supplier transacti on - but imposes special demands on the market
maker, who must be able to manage the commerce process from requ isit ion t o
order fulfillment and payment. This end-to-end support must take place over a
netw ork application archit ectu re capable of support ing t housands of users in a
high ly distr ibut ed, ful ly scalable Internet environment . The B2B marketp lace
plat fo rm should also enable complex business rules, workf low , and relat ionships,
and allow for integration wit h custom and th ird-party commerce modules.
To compete successfully in the B2B marketplace arena, market makers need a fully
functional solut ion t hat accommodates the needs of t heir buyers and suppliers. This
should allow market makers to extend advanced services to the trading communi ty.
The advantage w ill accrue t o t hose market makers who ally t hemselves wi th
technology solut ions vendors wi th the expertise to launch and customize B2B
marketplaces quickly.
Make the First Move
Speed-to-market i s another front on which small, thi rd-part y players can potenti ally
gain valuable ground over existi ng p layers. Slow -moving, complacent large buyers
can be outdone by small, nimble compet itors able to establ ish and qui ckly populate
a B2B marketp lace. If not anticipated by the larger market maker, this early-str ike
strategy can leave the market wit h no true consolidation of buyer power, allowing
the third-party platform to grow into industry-standard status. Once established,
the new marketp lace may be able to resist pressure f rom the lagging rivals.
The Future of B2B
From the perspect ive of today's business managers, the new B2B e-commerce wave
consists of equal part s th reat and opport unit y. It w ill split most industries'
Players wi th market-leading
buyer power are able to
bind a community of
suppl iers and smaller
buyers fi rmly t o t heir B2B
marketplace.
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B2B Overview 17
competitive field in into two camps the prepared and the unaware. Like every
great paradigm shif t, t he global rise in elect ronic B2B trading relationships presentsa pot ent ially massive shif t in pow er. Small suppliers can establish access to an
enti rely new class of technology-enabled customer, and rapidly develop i nto a
major market player. Established giants can suddenly find themselves vulnerable,
threatened by faster moving and more technology-enabled competitors.
Suppl iers who want t o be an industry leader must seize the opportunit y presented
by the new economy. For t hose aggressive and focused enough to perform online,
the upheaval and pace of t oday's electronic business world can yield t remendous
benefit.
The compelling benefi ts that B2B marketp laces of fer fo r buyers, suppliers, and
market makers are driving the rapid adoption of these new markets. Marketplaces
are the latest and most significant weapons to reshape B2B commerce relationships,
and w ill soon aff ect all businesses in one way or anot her. The primary beneficiaries
of the coming B2B wave wil l be those who use the web to extend, deepen, and
create business relat ionships.
Market places of fer companies the chance to develop and enhance their most
important relationships those wit h buyers and suppl iers whil e enabling market
makers to prof it from new revenue opportunit ies. Companies can use B2B
marketp laces to strengthen t heir exist ing trade relationships, discover and develop
new ones, and promote faster and more efficient t rading.
The rapid adopt ion of B2B marketplaces wi ll shape the future of global business. In
the years to come, marketplaces of all types will proliferate on the worldwide stage,
integrating progressively deeper layers of the global business ecosystem.
The aggregation of buyers and sellers in centralized e-markets has significantimpl icati ons for compet it ion, pricing, and eff iciencies. These exchanges wi ll l ikely
reshape some industr ies greatly, depending on what transparencies are lacking and
to w hat degree.
The rapid adopt ion of B2B
marketpl aces wil l shape the
fu tur e of global bu siness.
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B2B Overview 18
It w ill vary signi fi cantl y by industr y, and we think blanket assumpt ions are
dangerous. It's like w e're in Pamplona, and that click behind you was the latch onthe gate for the running of the e-commerce bulls, and we'll see who gets trampled.
A few predictions:
Strong compet it ors wi ll become dominant in eff icient markets, since their
comparat ive advantages become known and applicable across the ent ire
market.
Weak competitors will get weaker as they lose geographic protection from
stronger competitors.
Intermediaries who profi ted f rom the geographic fragmentation could be
at risk if their only added value was bridging the spatial gap.
Suppliers will become more specialized as they search for comparative
advantages by squaring of f against the t op t ier of national and g lobal
compet it ors, instead of regional compet it ors. Specialization will lead to
more choice, service, and customization.
Since buyers will be able to ini tiate and terminate supplier relation ships
more easily, the cost of searching fo r and establ ishing new commercial
relationships will fall.
In all likelihood, prices won 't be driven through t he floor and suppliers
margins will not completely erode.
There wil l be some savings, but theyre more likely to come in t he form of
unif orm prices fo r similar buyer needs. Transparency will root out
inefficiencies and aberrations. Buyers with less efficient processes that
enforce uniform buying across their ow n organizations will now have the
tools to implement and moni to r procurement policy. Suppliers can't count
on the unknow ledgeable buyer to prop up margins and will have to t ake
care to target customers who value their products and services.
Weak competi tor s get w eaker
as they lose geographic
protection from stronger
competitors.
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