b2b overview

8/2/2019 B2B Overview

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B2B Overview 1

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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B2B Overview 2


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B2B Overview 1

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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B2B Overview 2

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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B2B Overview 3

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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B2B Overview 4

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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B2B Overview 5

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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B2B Overview 6

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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B2B Overview 7

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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B2B Overview 8

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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B2B Overview 9

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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B2B Overview 10

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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B2B Overview 11

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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B2B Overview 12

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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B2B Overview 13

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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B2B Overview 14

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.


18/21

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.


19/21

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.


20/21

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.


21/21

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