B2B: Storm Clouds on the Horizon & Could Finally be King?

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Goldman Sachs predicts the business-to-business market will reach $1.5 trillion by 2004. Another prediction is that "Groups will get together to collaborate in many e-hubs. They will join to create 'superhubs.'"

There have been something like 74 B-to-B exchanges announced in the Spring and early summer of 2000, but actually getting them off the ground and launched can be a very arduous and demanding process

According to author, Jennifer Baljko Shah, writing in Tech Web on the Online Exchanges 2000 conference in San Francisco, B2B exchanges face many complex challenges. "The most pressing issues revolve around reaching critical mass, operating in multiple languages and currencies, tackling direct materials procurement, and integrating with back-end systems ... and financial databases".

Also, as James M. Wejman, an associate partner at Andersen Consulting, Chicago, points out, every company in the supply chain has to respond rapidly. " If there is a disconnection, the extended chain won't work."

We know marketplaces have to be big. There must be enough buyers and sellers to support it. But it can't be too big or deep pocketed corporations will come in and create their own marketplace, holding the trades hostage : the Big 3 auto makers, Ford, GM and Daimler-Chrysler plan to set up their own exchange.

Because there is only room for 2 or 3 top players in each marketplace, as well as because of the increased difficulty obtaining funding after the April collapse of the Nasdaq, the cost of set up, the difficulty of connecting buyers and sellers, and the increasing cost of driving traffic to a website, launching and maintaining a B2B exchange has become ever more challenging and intensely competitive.

In addition, many of the biggest B2B exchanges are coming to believe it is not enough to simply set up an exchange, it must also be in a content-righ environment that delivers increasing value to the user. The hope is, just as Amazon.com created a huge community of readers who generated content and enhanced the site with their reviews, that users on a marketplace exchange will want to see suppliers reviewed, keep up with the news in their industry and share tips with each other. In this competitive environment, high quality content might be a key differentiator and get users hooked on the website with the "best of breed" content in that space.

So, to assure success, you not only have to have the best engineers create your marketplace, you have to make decisions on content strategy and raise the money to pay for implementing it.

Despite these challenges market exchanges are continuing to proliferate. Goldman Sachs predicts the business-to-business market will reach $1.5 trillion by 2004. So for now, the quest for yet another B2B is like the elusive search for the Great White Whale or like the Great Gatsby's search for a future which would forever recede before him. And many are quite optimistic. James M. Wejman forsees much broader linkages among different hubs. "Groups will get together to collaborate in many e-hubs. They will join to create 'superhubs.'"