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 / Fourth Quarter 2001 / Issue 25(originally published by Booz & Company)


B2B Benchmark: The State of Electronic Exchanges

• Full Service. Full Service exchanges represent only 5 percent of the e-Marketplace population, and for good reason. A company needs deep pockets to simultaneously develop information exchange, digital catalogs, online auctions, logistics services, supply chain planning, and design collaboration. Although all the core services achieve a high penetration in this segment, only six entities — less than one-half of 1 percent of our survey population — currently offer all six services. Naturally, the Full Service cluster has the highest percentage of consortium sponsorship. Although consortia represent less than 5 percent of the total e-Marketplace population, they account for 19 percent of this segment.

Covisint, the automotive-industry consortium, is one e-Marketplace that offers all six services. Created in February 2000 by a merger of AutoXchange and TradeXchange (independent exchanges under development at Ford Motor Company and the General Motors Corporation, respectively), Covisint now also lists DaimlerChrysler AG, Renault SA, and Nissan Motor Company among its members. By combining $240 billion in purchasing scale, Covisint plans to speed product development, enhance competition among the supply base, and streamline the flow of parts through the supply chain to save more than $1,000 per vehicle.

Like most e-Marketplaces, Covisint has assembled technology from a number of companies: Commerce One powers its catalog and auctions, SupplySolution Inc. supports supply chain planning, MatrixOne Inc. and Engineering Animation Inc. (recently acquired by Unigraphics Solutions Inc.) combine to satisfy design collaboration, and Oracle provides the underlying technology platform/infrastructure. Members can access these tools through the Covisint portal, which will eventually provide links so that data can be seamlessly transferred  from one application to the next. With different applications working in an integrated manner, it will be possible for items won in an online auction to be transferred seamlessly to a digital catalog, along with the winning price, and later tied to the supply chain planning tool to schedule orders.

• Specialty Services. The entities in the Specialty Services segment offer only two core services (information exchange and logistics services). In fact, some players in this segment may not qualify as e-Marketplaces by others’ definitions. But because they leverage the Internet to facilitate commerce among businesses, these Specialty Services providers meet our definition. By and large, companies in this cluster provide information or other niche services of value to a single industry. The narrower scope of this segment provides a smaller potential revenue base; 6 percent of its constituents — more than double the percentage of the rest of our profiled population — have already failed. shows how a Specialty Services e-Marketplace can survive. An information and business solution provider for the upstream petroleum business, UpstreamInfo was formed in May 2000 by Chevron, EDS, The Information Store, and Raytheon. The company’s service links upstream petroleum companies, government agencies, and service contractors by targeting the duplication and waste in the petroleum industry’s expenditure on engineering and geoscience information. With $50 billion spent annually on information to find, extract, and process oil, the industry could save tens of millions of dollars each year thanks to UpstreamInfo’s specialty service.

Predictions and Advice:
Likely Winners and How to Avoid Losing

Constant change seems to be the only certainty in business today — and the e-Marketplace phenomenon offers an example accelerated beyond even the normal hectic pace of our times. Out of the 1,802 e-Marketplaces we profiled in detail, dozens failed even as we compiled our survey. As in all periods of upheaval, failure will predominate, although some exchanges will succeed wildly. The three groups that have the most at stake in the coming shakeout — consortium participants, independent e-Marketplaces, and mid-sized corporate buyers and sellers — have different expectations of survival.

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  1. Simon Caulkin, “Europe’s B2B Benefit,” s+b, Third Quarter 2000; Click here
  2. Keith Krach, “B2B Myths — and the Truth Underneath,” s+b, Fourth Quarter 2000; Click here
  3. Tim Laseter and David Evans, “Beating the B2B Odds,” s+b, Second Quarter 2001; Click here
  4. Richard Brown, “Growth Trajectory: Executives Report B2B Adoption Is Well Under Way,” Line56, June 2001; Click here
  5. Richard Wise and David Morrison, “Beyond the Exchange: The Future of B2B,” Harvard Business Review, November–December 2000; Click here
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