ERP Vendors Push Private Exchanges

Revamping ERP to support collaborative commerce is becoming increasingly common.

Revamping ERP to support collaborative commerce is becoming increasingly common. But, experts say, corporations shouldnt stop there. As organizations turn their attention toward linking their enterprise resource planning systems to the Internet, they should also focus on building and integrating them with a private trading exchange.

"We expect over the next few years that companies will hunker down and get the most of the software they bought," said John Bermudez, an analyst at AMR Research Inc., in Boston. "Private exchanges are a way to get a little more out of the [ERP] software theyve spent so much money on installing in the past."

Private trading exchanges differ from public e-marketplaces: They are used by a single organization to collaborate with its partners and suppliers. While not new in concept, much of the technology and business processes that enable these private marketplaces are. AMR estimates that the private trading exchange market will explode this year, fueling a $35 billion software industry by 2005.

Eager to cash in on that growth, leading ERP vendors have begun introducing software for deploying private exchanges that can be integrated with an enterprises existing ERP systems. At SAP AGs international e-business conference last month, for example, company subsidiary SAPMarkets Inc. announced MarketSet 2.0, private exchange software developed jointly with Commerce One Inc. that supports not only online business-to-business transactions but also processes such as collaborative engineering and planning, as well as wireless access. The company said private exchanges built with MarketSet 2.0 can be integrated with ERP and collaborative commerce applications from SAP and other vendors.

Over the last year, vendors including J.D. Edwards & Co. and Oracle Corp. have released their own versions of private exchanges.

Enterprises that have deployed ERP applications are beginning to weigh the relative merits of private exchanges and open e-marketplaces. Colgate-Palmolive Co., which recently completed a global upgrade to the SAP R/3 4.6 platform, actively participates in consumer products e-marketplace Transora. Its membership in the consumer products consortium plays a large role in the companys efforts to conduct collaborative commerce, said Ed Toben, Colgate- Palmolives vice president for Global IT.

While Colgate-Palmolive is committed to Transora, Toben said he will consider deploying SAPs private exchange module if it makes sense for his company to do so in the future. "If the business strategy requires a private exchange, then its an avenue we will explore," Toben said. "Our strategy is to go as far as we can with SAP because of integration issues. The world is complex out there, and you make a conscious effort to simplify the number of vendors in your portfolio."

AMRs Bermudez said even if an organization is committed to a public exchange, building a private trading exchange may also make sense. A private exchange, he said, can provide a single integration point for B2B e-commerce and serve as the foundation for collaborating with trading partners.