Aiming For the Bull’s-Eye of the B2B E-Marketplace
11:01 AM EST Mon. Nov. 13, 2000
From the November 13, 2000 issue of VARBusiness
But IT providers who can sort through the mess and capitalize on the e-marketplace phenomenon stand to reap hefty rewards. After all, the costs of interacting with suppliers and customers can be staggering, and helping companies to reduce those costs will be big business.
Beyond creating or operating e-marketplaces, there are several ways to cash in on this trend. Infrastructure providers, for example, can act as e-marketplace enablers; application vendors can license their software to e-marketplaces or use them as channels; and integrators can help users hook up their back-end systems to them,and that is just for starters.
But beware: Not all B2B e-marketplaces are created equal. Given the sheer number of e-marketplaces that exist today, a shakeout is inevitable. To reduce the risk of running aground, it is important to recognize the inherent differences among e-marketplace business models and to be able to assess the strategic advantages and risks associated with each.
One of the best ways to understand those differences is to look beyond an e-marketplace's surface functionality and instead focus on the way it operates and delivers its services. Today, for example, e-marketplaces are built around two basic operating models and two basic delivery models. The combination of an e-marketplace's operating model and its delivery model gives a blueprint of how the e-marketplace will compete.
Operating And Delivery Models
The two operating models break down as follows:
Laissez-faire e-marketplaces work like electronic matchmakers to bring together buyers and sellers. They provide value by aggregating information (such as vendor directories, product specifications and prices) and services (such as auction and RFQ capabilities), and delivering them in a convenient, centralized location. Although individual strategies vary, laissez-faire e-marketplaces typically serve both buyers and sellers and compete based on their features and the fluidity of their commerce.
Mediated e-marketplaces may offer features similar to those of laissez-faire e-marketplaces, but their core value lies in their ability to source and prenegotiate on behalf of buyers. As a form of procurement outsourcing, this model appeals to the passive buyer, one that prefers to spend as little time as possible researching or haggling with suppliers. Mediated e-marketplaces, therefore, compete based on quality-of-service, customer and supplier relationships, and the ability to offer compelling deals.
While the two operating models provide a framework for analyzing e-marketplace behavior, the two delivery models outline how an e-marketplace is packaged to users. Each delivery model has its merits and positions an e-marketplace's competitive stance differently from the other.
The standalone delivery model, for example, works well when users tie the e-marketplace into their own custom enterprise-resource planning or supply-chain management applications. While most users of standalone e-marketplaces probably won't integrate right away, those that do can avoid costly re-keying of data, and can tie in the e-marketplace more seamlessly with supporting business functions.
Embedded e-marketplaces that are "built-in" features of a host application allow users to have tight, standardized integration between the application and the e-marketplace,instantly. On the downside, the success of an embedded e-marketplace depends heavily on the installed base or popularity of the anchor application, and the willingness of users to migrate from any existing legacy applications.
Although, on the surface, it may appear to the casual observer that B2B e-marketplaces are all doing similar things, in reality, much more is going on behind the scenes. Information technology providers that can identify the operating and delivery model combinations that e-marketplaces use will be better able to tailor their strategies to the unique objectives of each type,and be better able to manage their exposure to risk in this rapidly developing market. Smart providers will use operating and delivery model classifications to help customers sort through questions such as:
While, at this point, we can only speculate about the answers to those and other questions, by focusing on the basic building blocks of an e-marketplace,its operating and delivery models,we can at least offer a framework from which to pose them. After all, once you,and your client, know where to aim your arrows, you have a much better chance of hitting the bull's-eye.
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