Playing More Than the Host
As business-to-business marketplaces struggle to devise a profitable and sustainable business model, some B2B companies are opting to become more than transaction hosters.
A small but influential group of companies, such as Ventro Corp. and e-Steel Corp., have decided to begin developing their own technology. The belief is that the winning solution for B2B involves having the expertise to handle the dirty work involved in connecting to and working with an exchange through in-house products.
Ventro, which began as a chemicals exchange, is transforming itself into just such a technology provider, according to David Perry, CEO of the Mountain View, Calif., company. Last month, Ventro closed two exchanges and said it would partner only with established companies.
"Every exchange is essentially a very specialized ASP [application service provider] anyway, so it makes sense for us to take the next step and offer some of the applications ourselves," said Perry at the Line56 B2B conference here last month.
For its part, e-Steel, a New York-based metals exchange, has bulked up its development team to the point where it makes up 40 percent of its staff. "A year from now, people will see us much more as a technology provider," said Ken Thompson, e-Steels chief operations officer.
In March, e-Steel will begin implementing a project that ties some 150 companies into an integrated supply chain that links metals fabricators to automaker Ford Motor Co., Thompson said.
Initiatives such as those from Ventro and e-Steel may set up a situation where the exchanges find themselves competing against their own software vendors, such as Ariba Inc. and Commerce One Inc.
Ariba CEO Keith Krach isnt worried. He said Ariba, also of Mountain View, will continue to partner to bring out new B2B technologies. For instance, Ariba is in discussions with Bethlehem Steel Corp. to package that companys rail transportation expertise as a logistics module for exchanges.
However, many B2B enablers, such as specialty metals exchange MetalSpectrum LLC, still believe providing services will attract and keep customers. This quarter, the Atlanta-based exchange will implement i2 Technologies Inc.s Pricer technology on its site, which will enable sellers to establish guidelines for groups of buyers so that sellers can produce price quotes in minutes instead of hours, said MetalSpectrum Vice President Bob Trotter.