IDC: B2B going the network way

IDC reveals its projections for B2B marketplaces for year 2004. Forecasts include linking up of trading platforms to form trading networks and the growing importance of independent e-marketplaces.

The e-marketplaces and procurement platforms of today are going to link up and cooperate with one another to form a network of exchange platforms. And at the heart of this network will be a community centric exchange that facilitates information exchange and provide collaboration.

SINGAPORE - That's the vision that IDC has for the future of B2B marketplaces as it was revealed by the company's senior vice president of communications and Internet research, Gigi Wang, at last week's IDC Asia Pacific IT Forum 2001.

What do B2B platforms need to survive and thrive?YES

Many of the marketplaces today are either owned by the buyers or sellers of that market and would be more appropriately called procurement or distribution platforms for their owners.

In the middle of this mix, are independent marketplaces that are the truly pure-play many-to-many trading platforms owned and operated by neutral third parties.

According to Wang, this is the model that has the hardest time of all.

"This is really tough because on the one side, you have the suppliers wanting to reduce the cost of sale, and on the other side, you have buyers wanting to reduce their purchasing cost, but there's still got to be something left over for the e-marketplaces," said Wang. "So it's been very difficult for these e-marketplaces to survive because it's very difficult to remain liquid and to build up volume."

Fig 1.1 - Internet commerce around the world

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Already, trends are developing where all three types of trading platforms are interacting with one another to make use of each other's strong suit, according to Wang.

An independent e-marketplace's key advantage is its ability to find the optimal price of the moment. The platform is ideal for competing for the optimal prices that matches available supply to existent demand.

That's one reason why procurement and distribution platforms would want to gain access to these marketplaces-to access spot markets and to provide the opportunity for lowering the cost of indirect supplies.

"The advantage of the e-distribution network for interfacing or linking to the e-marketplaces is that they can expand their nominal choices that they have," Wang said. "They can work and bring in a number of smaller companies and really expand their global reach."

Another trend in the emerging network model of B2B trading platforms, according to Wang is the development of what IDC calls the e-exchanges.

The exchanges sit right in the middle of the B2B networks giving every participant a single interface that will allow them access to all the platforms.

Worldwide milestones for 2001

  • IT spending will exceed US$1 trillion
  • Internet commerce will exceed $500 billion
  • Mobile phones in use will exceed 600 million
  • PC installed will exceed 500 million
  • Web users will exceed 500 million
  • Mobile wireless commerce will exceed $1 billion

IDC

The role of the exchanges will not be for commerce, it is instead, to provide what Wang called the "human element" of commerce such as collaboration and information exchange.

"To provide the information exchange and to really improve the supply chain efficiency is the goal of the exchanges," said Wang. "It provides instant access to a community through the exchange and you have a relatively efficient model."

Wang sites the Chevron retail market exchange as an example of these emerging exchanges.

The Chevron exchange grew from a platform for the management of Chevron's mini-marts to a large exchange managing promotions and distributions of several large brands and products over the past year.

According to Wang, these exchanges will work from a service model and will therefore charge a subscription fee instead of individual transaction fee.

"It is a slightly different model but we see these exchanges growing very significantly," said Wang.

On the overall, the B2B space looks good. Volume of transaction going through these platforms, according to Wang, will expand from US$356 billion last year to US$3.1 trillion by the end of 2004.

Independent e-marketplaces are expected to grow significantly in importance--taking up as much as 45% of the total transaction volume by the end of the same period.

Consolidation is also expected take place within those years, leaving a total of about 300 exchanges worldwide at the end.

B2B e-commerce forecast
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