eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
Big public e-marketplaces, which were all the rage a year ago but have since taken a beating, are looking for ways to make themselves relevant through providing more collaboration services.
But as they do, they face a rising tide of interest in one-to-many private trading marketplaces. “We were right that the Internet fundamentally changes business interactions … and that there would be new mechanisms for how you interact with your partners,” said Mohan Sawhney, an e-commerce consultant and professor at Northwestern Universitys Kellogg School of Management, in Evanston, Ill. “What we got wrong was the nature of the mechanism that would facilitate that.”
Instead of going to a public marketplace that aggregates buyers and sellers, companies should be looking to electronically enable relationships they already have developed, Sawhney said. “Its more important for you to find ways to do business with the people you are already doing business with than it is to find new business,” he said.
Even some of the exchanges themselves acknowledge that they do little to increase efficiencies in straight procurement. Transora, the consumer packaged goods exchange formed by Procter & Gamble Co. and others, saw its first transactions in April, but Chief Business Officer Rick Herbst said he doesnt believe the exchange will engage in auctions for more than two years.
“The marketplace doesnt do a good job with auctions,” Herbst said. “There are no efficiencies of scale. Our focus is in building infrastructure where there is economy of scale.”
Chicago-based Transora is implementing collaborative forecasting planning and replenishment software from Synchra Systems Inc., which it sees as a key differentiator, Herbst said.
Currently, Transora has 11 suppliers on board. In the next eight to 10 weeks, Herbst anticipates announcing basic supplier enablement with electronic data interchange connectivity. By the end of next month, eight manufacturers will be online with Transora, according to Herbst.
Similarly, Omnexus, an exchange created by leaders in the plastics industry, is looking to broaden its base of services. By next month, the Atlanta-based exchange will launch online financial services for its customers. It plans to follow that up with design services, insurance and a host of other offerings, like a shopping mall, said Michael Thaler, vice president of strategy for Omnexus.
Omnexus also plans to provide ERP (enterprise resource planning)-to-ERP connections to more than 1,500 suppliers. This will provide information on product quality, availability, pricing, terms and conditions through machine-to-machine interactions without needing human intermediaries. Next month, exception processing will be introduced.
“Omnexus becomes the integration hub,” Thaler said. “Any buyer connects to the four founders ERP systems.”
But public exchanges have their work cut out for them when it comes to changing attitudes. There is a feeling among many that big e-marketplaces have lost some of their previous glamour.
Converge Inc., an electronics parts exchange, called off an event this month to ballyhoo its launch, which went ahead, anyway. “The B2B [business-to-business] bubble has burst, and there is no sense in announcing just to create awareness,” said Bob Kramich, vice president of marketing at Converge, in Peabody, Mass.
Some companies that the big public exchanges thought they were going to woo are instead setting up private exchanges to deal directly with their suppliers. Newport News Shipbuilding Inc. last year was approached to start a shipbuilding industry exchange but chose not to because officials didnt feel that online indirect materials procurement would save it much money. The company spends a lot more on procurement of goods used directly in shipbuilding, said CIO Stephen Hassell, in Newport News, Va.
“After looking at the dynamics of our business, it didnt make sense,” Hassell said. “Weve put our efforts into developing a private exchange.”
NNS next month will roll out the first versions of an information portal that will enable its suppliers and customers to access information on current shipbuilding projects. The portal is built on Microsoft Corp.s WebForms and WinForms technologies. Although aircraftcarrier.net will be strictly informational initially, it could mature to support transactions, Hassell said.
Software developers see the shift in attitudes. Integration software developer eForce Inc., of Hayward, Calif., last week announced that it will work with Sun Microsystems Inc., of Palo Alto, Calif., to create myPrivatemarketplace private exchange software for manufacturers and life sciences companies. No availability date was given.
But dont count out the big public exchanges in the long term, said Tim Clark, an analyst at Jupiter Media Metrix Inc., in Los Altos, Calif.
“Were at the stage … of building out those private trading networks,” Clark said. “Once people get comfortable with that theyre going to say, Wait a second, maybe there is a role for public exchanges.”
