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| To B2B or Not to B2B? |
| Taking the plunge into an online B2B marketplace isn't always easy, but it pays off. |
By G. Patrick Pawling
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For some companies, the thought of conducting business from start to finish online is daunting. But when they weigh the benefits and consider the options, many find that business-to-business exchanges, or e-marketplaces, help the bottom line and their relationships with other companies—making B2B worth the up-front effort.
Matthew Sanders, an e-business trade analyst at Forrester Research, says pulling an e-marketplace out of a box is difficult. "There is a lot of consternation about which model will survive," he says. But that's not an argument for waiting. "It's an argument for getting started, because this stuff is not going to go away," he explains. Companies reduce mistakes by engaging consultants, who can also reassure newcomers by providing experience.
One of the biggest myths regarding B2B exchanges is that they make every product a commodity, says Martha Greer, vice president of marketing at Ventro, which provides technology and services to B2B marketplaces.
"[Commoditization] is kind of a linchpin question around the whole B2B game right now," says Jon Derome, a senior analyst at The Yankee Group.
"There is fear out there," agrees Greer. "At the top of the list is price—'Oh no, if I join a marketplace, all the prices will go down.'" In reality, B2B exchanges can highlight value. Fast delivery and good terms are valuable. Through members and customers, exchanges efficiently spread the word about the benefits.
And the value applies across industries. For instance, scientists spend hours going through catalogs to order supplies. They can now save time by going to a B2B Web site, increasing their bench time, which is more valuable. With exchanges such as SciQuest.com buyers can save an average of 4.4 hours a week, according to Peyton Anderson, vice president of business development. "The most-compelling value our customers are looking for is efficiency gain," says Anderson.
New Relationship Opportunities
"The marketplace is not about transactions per se. It's about the services that exist around the transactions," says Greer. "Most of the e-marketplaces built so far have been about price, but what's happening now relates to improving relationships between buyers and sellers. We have to get people to take their eyes off product prices. It's the whole process—that's where they save."
"There is definitely fear regarding what happens to business relationships when you automate things more," says Derome. But the real results are enhancing relationships.
"It has nothing to do with going online to find better prices. It's about using technology to make a company efficient," Derome adds.
Covisint is a good example of how business relationships are changing. In the traditionally competitive automotive industry, historical rivals joined forces to create an industry-wide exchange. (For more information, see "Driving the Automotive Industry" in the January/February 2001 issue.)
Derome notes that B2B exchanges haven't matured enough yet to suggest obvious models. "It's pretty complicated stuff, but tremendous gains await," he promises.
"Get started now," advises Greer. She says that smart companies get into B2B exchanges by looking around. Competitors may already be showing the way, she says, "but sometimes it's the second mouse that gets the cheese."
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