Business grapples with how to take relationships online

B2B or not B2B? That's no longer the question corporate executives are asking about their e-commerce strategies.

The need for a business-to-business Internet strategy is a given; the questions now are what, how and with whom?

IT customers attending the Internet & Electronic Commerce Conference in New York this week will be searching for answers to those questions, and there will be no shortage of vendors touting software and services to help them establish B2B relationships online (see related story at right).

The proliferation of vendors in the B2B space, however, has only added to the confusion many IT managers face when developing strategies to link their company's customers, buyers and suppliers.

"A lot of [vendors] are throwing mud at the screen. You really have to solve some problem for the customer," said Nicole Faucher, CEO and founder of CapSpring. com Inc., in San Francisco, which is working with Asera Inc. to develop an online financial services market for institutional investors.

Many executives at large corporations believe throwing mud is better than sitting still when it comes to B2B commerce. They're trying to hammer out their online priorities, but many are still stuck at the starting block.

"There's the perception that everybody is out there running," Robert Schwartz, vice president of IS at Panasonic, of Secaucus, N.J., said at IBM's Industrial Sector Executive Conference in Orlando, Fla., this month. "[But] there's still a lot of indecision."

Panasonic, Schwartz said, is still struggling to develop a procurement strategy and create an online direct-sales channel that won't conflict with its retail channels. At the same time, it's facing new competition from startups built from the ground up for direct Internet sales.

"They're going to continually be pushing us on a price perspective," Schwartz said.

Not all large corporations are behind the B2B curve. Last week, General Motors Corp., Ford Motor Co. and DaimlerChrysler AG said they would combine online purchasing activities, merging Ford's AutoExchange and GM's TradeXchange procurement systems.

But many of their established brick-and-mortar compatriots are still honing strategies while smaller competitors are building and using B2B sites. It's critical, experts say, that these large companies do a better job of prioritizing projects and setting benchmarks for their B2B strategies.

"A year ago, many end users said, 'OK, what can we do?'" said Bob Parker, an analyst at AMR Research Inc., in Boston. "Now that's shifted to 'What should I do first?'" Parker advises executives that an e-commerce project can't be measured solely in terms of return on investment. Benchmarks can range from improved relationships with suppliers, to procurement savings, to better order fulfillment times.

Dow Chemical Co., in Midland, Mich., for instance, has put its focus on bringing CRM (customer relationship management) to the Web. Mack Murrell, global director of Dow's customer interface initiative, said the company is building Web interfaces for its Siebel Systems Inc. CRM software in an effort to bring Dow closer to its customers online, giving them access to critical ordering and inventory data.

"Customer focus is the key to growth," Murrell said. "One of the ideas is to make sure that interaction is happening at the optimal place for the customer and for the provider." But Dow is only six months into an 18-month initiative, and Murrell said he understands that speed is essential in bringing functions such as sales and procurement online. "We're trying to participate [in e-commerce] as a dot-com would," he said.

Another pressing issue for corporations is the emergence of online trading networks—Web sites that allow customers to buy materials from manufacturers and allow corporations to deal with many partners at once.

But with change come tough choices. IT executives now face the question of which exchange model to adopt. Do they build their own exchange to sell products exclusively, or do they participate in a program offered by an independent intermediary?

For Eastman Chemical Co., of Kingsport, Tenn., the answer is both. Eastman is raking in $100 million a year in online revenue from a procurement site built on technology from Commerce One and launched in 1998. But intermediary sites will also play into the company's strategy, according to Fred Buehler, Eastman's director of electronic business.

DuPont has taken the idea a step further, believing single-vendor sites will not likely attract significant attention from potential customers. "We believe the prevailing model is one of vendor neutrality," said Stewart McCutcheon, e-business technology director for the Wilmington, Del., company.

Not every user is sold on the intermediary concept. Randy Stone, CIO of Teradyne Inc., a Boston-based maker of telecommunications and electronics testing equipment, prefers to have control of her customers' buying habits.

"I want to own that pipeline," Stone said. "I'm not sure I want somebody else negotiating price and shipments."

But on the Web, more than anywhere else these days, time is money. Dow's Murrell repeated the most common refrain among larger IT departments: Now is the time to jump on the e-commerce bandwagon. "If your strategy is, 'I'll be a fast follower,'" he said, "you're in trouble."