B2B E-Business Implementation Approaches
There are four general B2B implementation approaches in use. The first is independent B2B marketplaces, such as Commerce One, Ariba, and Freemarkets. The second approach discussed is the private B2B approach, such as the one found at Unilever and Cisco. A third commonly encountered B2B implementation approach involves consortiums, as have been formed in the auto, aviation, chemical and petroleum, building-materials, aerospace, and retailing industries. There is a fourth, transitional approach that was implemented by GE (General Electric), for example.
Independent B2B Marketplaces The first approach discussed, which involves an existing company finding an independent B2B marketplace (emarketplace), is a commonly encountered one. Many companies begin the B2B integration process by focusing on the purchasing cycle. Obtaining goods from suppliers using independent B2B marketplaces very often is the fastest and most economical way to acquire B2B capabilities.
This is done by selecting an independent B2B provider, such as Commerce One, Ariba, or Freemarkets, to come in and integrate the company’s internal systems with the selected independent market exchanges (e-marketplace).
An independent B2B marketplace or e-marketplace is an Internet destination where businesses from around the world can come together to buy and sell goods and services in an auction format. The destination and the auction are controlled and managed by the independent B2B provider.
Buyers prepare bidding-project information and post them on the site. Suppliers then download the project information and submit their bids. Buyers evaluate the suppliers’ bids and may negotiate electronically to achieve the best deal. The buyer then accepts the bid of the supplier that best meets their requirements, and the sale is finalized. Purchasers and suppliers can either pay a general fee, a per-transaction fee, or a combination of the two to the B2B provider, otherwise known as the Web host. Each one of these B2B providers has its own software applications and host Web sites.
For example, Commerce One uses its trademarked Enterprise Buyer proprietary software to link companies to all e-marketplaces of the Global Trading Web community on its Web site CommerceOne.net. Commerce One’s Global Trading Web is the world’s largest B2B trading community and provides unprecedented economies of scale for buyer organizations. This software can be purchased and installed by an existing company in order to obtain access to the Global Trading Web community that enables commercial transactions to take place between e-marketplaces.
Private B2B Exchanges The second approach discussed is private B2B exchanges.
A private B2B exchange is an e-marketplace created by a single company to provide e-business capabilities to its business units and preferred trading partners.
In 2000, in the early stages of e-business development, many companies trying to be ahead of the curve jumped into public B2B marketplaces usually run by third parties.
They soon discovered that there were many inherent problems. Although at times they were obtaining better prices, many times the diminished quality and increased rate of defects in the products were hurting their bottomline gain. There were also problems in returning defective items, receiving orders when promised, and maintaining continuity in the supply chain (Prince, 2001).
Today, more and more businesses with the necessary resources are developing their own private exchanges. The e-market focus of some companies, such as Wal-Mart, has turned away from public exchanges because finance, supply chain, purchasing, and IT managers realized that, in many cases, their systems and employees were illequipped to handle the technical and procedural requirements of large public exchanges (Krell, 2002). Wal-Mart has invested in middleware or enterprise application integration (EAI) technology to link its internal applications together and to a few (up to 12) critical suppliers in the supply-chain process. The real value of e-procurement, e-billing, and electronic supply-chain initiatives is realized through real-time, hard-coded integration (Krell).
Other companies, such as Siemens AG, have turned to private exchanges in order to limit access to procurement information (Konicki, 2001). Siemens prefers a private exchange because it does not want its competitors to have access to its production plans. Private exchanges are gaining momentum because, for those companies that have the resources to develop them, they are able to deliver the capabilities many public e-marketplaces promised but have not delivered: the ability to centrally manage procurement across many business units, the ability to enable real-time design collaboration and integration with back-end systems, and the linkage of production-, inventory-, warehouse-, and order-management systems.
Consortium
The third B2B implementation approach discussed is a consortium: a quasipublic online marketplace approach. A consortium is a group of companies within a particular industry establishing an exchange connecting each of them and their suppliers. Today, there is a consortium exchange in almost every industry. Consortium members fund most of these exchanges.
One example of a consortium is found in the auto industry. Ford, General Motors, and DaimlerChrysler together established Covisint.com as a global, independent e-business exchange. Covisint is the central hub where original equipment manufacturers (OEMs) and suppliers come together to do business in a single business environment using the same tools and interface.
Covisint enables companies to compress planning cycles and enhance supply-chain planning (http://www.covisint.com/about/). In February 2002, Covisint was handling 100 million supply-chain procurement transactions per month. These transactions take place between the exchange’s members and more than 2,000 of their suppliers (Krell, 2002). In 2004, however, Covisint experienced some major problems that led to the acquisition of the company by two other firms, Compuware Corp and Freemarkets, Inc. (Sullivan & Dunn, 2004).
Transitional
The fourth approach involves an existing company moving from a private B2B exchange to an independent, external marketplace venture. A good example of this would be General Electric (http://www.gegxs.com/gxs/ about). General Electric, given its vast capital resources and diversity across many industries, decided to develop and establish its own B2B software and private B2B operations. Subsequently, it used this experience to set up its own external, independent B2B exchange (called GE Global eXchange Services) to compete with the likes of Commerce One and Ariba in the B2B provider market. This type of approach would require a large amount of resources and is therefore not practical for many smaller businesses. Even for businesses the size of GE, the resources necessary to maintain such an exchange can become cost prohibitive (Barlas, 2002).
FUTURE TRENDS
B2B e-business experienced an initial boom based on unrealistic projections and expectations, followed by a few years of gloom based on the process of a new technology outgrowing its adolescent phase of development.
Recent projections by Standard & Poor’s, however, indicate that the future of B2B e-business looks bright. The growth of B2B e-business is forecasted to reach $3.6 trillion in 2005, $4.9 trillion in 2006, and $6.4 trillion in 2007 (Kessler, 2004).
One of the more successful B2B implementation approaches for the future seems to be that of large, private exchanges, such as Ariba and Freemarkets. According to Ordanini, Micelli, and Di Maria (2004), large, private B2B exchanges especially represent a promising phenomenon and offer superior capabilities of generating higher turnovers than smaller niche exchanges.
Electronic B2B transactions, as shown earlier, are already improving the competitiveness of enterprises through sinking costs, faster information, and enhanced flexibility, among other benefits. In the future, however, B2B will be not only the application of technologies, but also a motor of change for economic processes and industry structures: B2B applications have an enormous potential for the alteration of economic processes in the direction of the knowledge society (Schedl & Sülzle, 2004).
In the B2B e-business arena, increased activity through mergers and acquisitions is expected to continue into the future, not only in the middle market among small- and medium-sized competitors, but also among the larger B2B exchanges (“M&A Outlook,” 2005).
In the near future, more and more companies, especially finance and investment firms, will be adding multilingual dimensions to their B2B e-business strategies (“IndyMac Bank,” 2004).
Independent B2B Marketplaces The first approach discussed, which involves an existing company finding an independent B2B marketplace (emarketplace), is a commonly encountered one. Many companies begin the B2B integration process by focusing on the purchasing cycle. Obtaining goods from suppliers using independent B2B marketplaces very often is the fastest and most economical way to acquire B2B capabilities.
This is done by selecting an independent B2B provider, such as Commerce One, Ariba, or Freemarkets, to come in and integrate the company’s internal systems with the selected independent market exchanges (e-marketplace).
An independent B2B marketplace or e-marketplace is an Internet destination where businesses from around the world can come together to buy and sell goods and services in an auction format. The destination and the auction are controlled and managed by the independent B2B provider.
Buyers prepare bidding-project information and post them on the site. Suppliers then download the project information and submit their bids. Buyers evaluate the suppliers’ bids and may negotiate electronically to achieve the best deal. The buyer then accepts the bid of the supplier that best meets their requirements, and the sale is finalized. Purchasers and suppliers can either pay a general fee, a per-transaction fee, or a combination of the two to the B2B provider, otherwise known as the Web host. Each one of these B2B providers has its own software applications and host Web sites.
For example, Commerce One uses its trademarked Enterprise Buyer proprietary software to link companies to all e-marketplaces of the Global Trading Web community on its Web site CommerceOne.net. Commerce One’s Global Trading Web is the world’s largest B2B trading community and provides unprecedented economies of scale for buyer organizations. This software can be purchased and installed by an existing company in order to obtain access to the Global Trading Web community that enables commercial transactions to take place between e-marketplaces.
Private B2B Exchanges The second approach discussed is private B2B exchanges.
A private B2B exchange is an e-marketplace created by a single company to provide e-business capabilities to its business units and preferred trading partners.
In 2000, in the early stages of e-business development, many companies trying to be ahead of the curve jumped into public B2B marketplaces usually run by third parties.
They soon discovered that there were many inherent problems. Although at times they were obtaining better prices, many times the diminished quality and increased rate of defects in the products were hurting their bottomline gain. There were also problems in returning defective items, receiving orders when promised, and maintaining continuity in the supply chain (Prince, 2001).
Today, more and more businesses with the necessary resources are developing their own private exchanges. The e-market focus of some companies, such as Wal-Mart, has turned away from public exchanges because finance, supply chain, purchasing, and IT managers realized that, in many cases, their systems and employees were illequipped to handle the technical and procedural requirements of large public exchanges (Krell, 2002). Wal-Mart has invested in middleware or enterprise application integration (EAI) technology to link its internal applications together and to a few (up to 12) critical suppliers in the supply-chain process. The real value of e-procurement, e-billing, and electronic supply-chain initiatives is realized through real-time, hard-coded integration (Krell).
Other companies, such as Siemens AG, have turned to private exchanges in order to limit access to procurement information (Konicki, 2001). Siemens prefers a private exchange because it does not want its competitors to have access to its production plans. Private exchanges are gaining momentum because, for those companies that have the resources to develop them, they are able to deliver the capabilities many public e-marketplaces promised but have not delivered: the ability to centrally manage procurement across many business units, the ability to enable real-time design collaboration and integration with back-end systems, and the linkage of production-, inventory-, warehouse-, and order-management systems.
Consortium
The third B2B implementation approach discussed is a consortium: a quasipublic online marketplace approach. A consortium is a group of companies within a particular industry establishing an exchange connecting each of them and their suppliers. Today, there is a consortium exchange in almost every industry. Consortium members fund most of these exchanges.
One example of a consortium is found in the auto industry. Ford, General Motors, and DaimlerChrysler together established Covisint.com as a global, independent e-business exchange. Covisint is the central hub where original equipment manufacturers (OEMs) and suppliers come together to do business in a single business environment using the same tools and interface.
Covisint enables companies to compress planning cycles and enhance supply-chain planning (http://www.covisint.com/about/). In February 2002, Covisint was handling 100 million supply-chain procurement transactions per month. These transactions take place between the exchange’s members and more than 2,000 of their suppliers (Krell, 2002). In 2004, however, Covisint experienced some major problems that led to the acquisition of the company by two other firms, Compuware Corp and Freemarkets, Inc. (Sullivan & Dunn, 2004).
Transitional
The fourth approach involves an existing company moving from a private B2B exchange to an independent, external marketplace venture. A good example of this would be General Electric (http://www.gegxs.com/gxs/ about). General Electric, given its vast capital resources and diversity across many industries, decided to develop and establish its own B2B software and private B2B operations. Subsequently, it used this experience to set up its own external, independent B2B exchange (called GE Global eXchange Services) to compete with the likes of Commerce One and Ariba in the B2B provider market. This type of approach would require a large amount of resources and is therefore not practical for many smaller businesses. Even for businesses the size of GE, the resources necessary to maintain such an exchange can become cost prohibitive (Barlas, 2002).
FUTURE TRENDS
B2B e-business experienced an initial boom based on unrealistic projections and expectations, followed by a few years of gloom based on the process of a new technology outgrowing its adolescent phase of development.
Recent projections by Standard & Poor’s, however, indicate that the future of B2B e-business looks bright. The growth of B2B e-business is forecasted to reach $3.6 trillion in 2005, $4.9 trillion in 2006, and $6.4 trillion in 2007 (Kessler, 2004).
One of the more successful B2B implementation approaches for the future seems to be that of large, private exchanges, such as Ariba and Freemarkets. According to Ordanini, Micelli, and Di Maria (2004), large, private B2B exchanges especially represent a promising phenomenon and offer superior capabilities of generating higher turnovers than smaller niche exchanges.
Electronic B2B transactions, as shown earlier, are already improving the competitiveness of enterprises through sinking costs, faster information, and enhanced flexibility, among other benefits. In the future, however, B2B will be not only the application of technologies, but also a motor of change for economic processes and industry structures: B2B applications have an enormous potential for the alteration of economic processes in the direction of the knowledge society (Schedl & Sülzle, 2004).
In the B2B e-business arena, increased activity through mergers and acquisitions is expected to continue into the future, not only in the middle market among small- and medium-sized competitors, but also among the larger B2B exchanges (“M&A Outlook,” 2005).
In the near future, more and more companies, especially finance and investment firms, will be adding multilingual dimensions to their B2B e-business strategies (“IndyMac Bank,” 2004).
posted by Jane at 6:38 PM
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