Contenu connexe Plus de Steve Keifer (14) B2B E-Marketplaces Rise And Fall By Steve Keifer1. Slide 1 ©2009 GXS, Inc.
Rise and Fall of
the B2B e-
Marketplaces
A Look Back 10 Years Later
2. Slide 2 ©2009 GXS, Inc.
Some call it the Golden Age of B2B e-
Commerce. Others call it the height
of insanity.
Regardless of your perspective, it is
difficult to argue that there will ever
be another time like it in the world of
B2B e-commerce.
3. Slide 3 ©2009 GXS, Inc.
The marketplace era witnessed an
unparalleled infusion of capital and
an unparalleled appetite for risk.
Entrepreneurs around the world
engaged in widespread supply chain
innovation and experimentation.
4. Slide 4 ©2009 GXS, Inc.
Who Cares about the Marketplaces?
B2B e-Marketplaces
formed a long time
ago and they failed
So why bother
revisiting the issues
and challenges?
5. Slide 5 ©2009 GXS, Inc.
“Those who cannot learn from
history are doomed to repeat it”
George Santayana
7. Slide 7 ©2009 GXS, Inc.
The Field of Dreams
In the 1989 movie Field of
Dreams, Kevin Costner
builds a baseball field in
the middle of an Iowa
cornfield.
The field would be used
by Shoeless Joe Jackson
and 7 members of the
1919 Chicago Black Sox
team who were banned for
life for throwing games.
8. Slide 8 ©2009 GXS, Inc.
If You Build It…They Will Come
Ten years later this movie quotation became the
Motto for Dot Com Entrepreneurs
9. Slide 9 ©2009 GXS, Inc.
“Hockey Stick” Revenue Growth
…As they will be
followed by a
Hockey Stick sloped
period of rapid
growth
Revenue
Time
Investors should
overlook periods of
low revenues and
profitability after
startup…
10. Slide 10 ©2009 GXS, Inc.
The Land Grab Strategy
Buy as much property
as you can on the
assumption that you
will realize long term
revenue streams from
collecting rent (on-
going services)
Monopoly
Strategies
Prevailed
11. Slide 11 ©2009 GXS, Inc.
A B2B e-Marketplace
Facilitates the real-time
transfer of information, money
and goods
12. Slide 12 ©2009 GXS, Inc.
B2B e-Marketplaces were
going to Revolutionize
Supply Chains
13. Slide 13 ©2009 GXS, Inc.
Forward Auction
Multiple buyers
compete to
obtain goods or
services
Bidding drives
higher prices
until a winner
prevails
14. Slide 14 ©2009 GXS, Inc.
Reverse Auctions
Supplier competes
for the right to win
business.
Lowest bid wins the
auction.
Opposite Dynamics
$100,000
$90,000
$80,000
$75,000
$70,000
15. Slide 15 ©2009 GXS, Inc.
Traditional Supplier Selection Process
Face-to-Face
Negotiation between
Buyer and Seller
RFX to group of
Known Suppliers
E-Marketplaces
attempted to use the
Internet to introduce
new buyer-seller
relationships
16. Slide 16 ©2009 GXS, Inc.
Matching Buyers & Suppliers Online
BUYER SUPPLIER
17. Slide 17 ©2009 GXS, Inc.
E-Procurement
Employee
Compliance with
Purchasing Policies
• All preferred supplier
catalogs at single
corporate site
• Easy to use tools such as
wizards to guide buyers
through requisitioning
process
• Automating approval
process for purchases
18. Slide 18 ©2009 GXS, Inc.
E-Procurement
Savings of $10-$20 per
Purchase Order
19. Slide 19 ©2009 GXS, Inc.
E-Procurement
Automation of Requisition & PO Process
• Avoid keying of
information on paper
requisitions
• Reducing
purchasing errors
and rework
• Costs of mailing
paper POs from
satellite offices to
Headquarters
20. Slide 20 ©2009 GXS, Inc.
Excess Inventory
Over $100B in Excess
Inventory is Produced
Every Year
Excess Inventory in
the Apparel Sector
represents 7% of
Annual Sales
21. Slide 21 ©2009 GXS, Inc.
Excess Inventory Liquidation
Overstocked merchandise is
sold, often at a significant
price reduction, to discount
retailers.
E-Marketplaces provide
services to place excess
inventory with buyers around
the world.
Online auctions increased
price transparency through
expanded information flow
amongst buyers and sellers.
23. Slide 23 ©2009 GXS, Inc.
B2B e-Marketplaces –
They Were Built…but
Will they Come?
24. Slide 24 ©2009 GXS, Inc.
New Investment Strategies
Anyone with sufficient
capital and risk appetite
could build a e-marketplace
And they did…
• Venture Capitalists
• Technology Entrepreneurs
• Auto Manufacturers
• Grocery Retailers
• Electronics Manufacturers
• Logistics Providers
• Metals & Mining Companies
25. Slide 25 ©2009 GXS, Inc.
Three Models for Exchanges
Independent
(Public) Trading
Exchanges
Consortia
Trading
Exchanges
Private
Trading
Exchanges
First Wave
Funded by Venture Capitalists and
Entrepreneurs
Second Wave
Funded by Groups of
Buyers & Suppliers
Third Wave
Managed as IT projects
by single company
26. Slide 26 ©2009 GXS, Inc.
Independent Exchanges
Consortia
Exchange
Buyer Buyer Buyer Buyer
Supplier Supplier Supplier Supplier
Owner
Owner
Advantages
• Independent from
Legacy systems
• Neutral – No ownership
by buyer or supplier
• Governance model
allowed innovation and
agility
Disadvantages
• No default participation
from equity owners
• Got to market too early
before demand fully
developed
27. Slide 27 ©2009 GXS, Inc.
Consortia Exchanges
Consortia
Exchange
Buyer Buyer Buyer Buyer
Supplier Supplier Supplier Supplier
Advantages
• Well-funded by
customer/equity owners
• Deep knowledge of
industry processes
• Established base of
customers
Disadvantages
• Questionable neutrality
• Governance challenges
– owners are customers
• Security – possible
sharing of trade secrets
28. Slide 28 ©2009 GXS, Inc.
Private Exchanges
Private Exchange
(Owner)
Buyer Buyer Buyer Buyer
Supplier Supplier Supplier Supplier
Advantages
• High participation levels from
captive base of suppliers and
buyers
• Built upon ERP & EDI
systems with high levels of
usage
• Driven by ROI from hub-
owner versus investor goals
Disadvantages
• Functionality and access
different for each hub
• Buyers & suppliers forced to
use many different
exchanges
29. Slide 29 ©2009 GXS, Inc.
The Exchanges were Built…
At the Peak of the Dot Com
Era there were over 2500 B2B
e-Marketplaces
30. Slide 30 ©2009 GXS, Inc.
Rise & Fall of the B2B E-Marketplaces
Source: Shakeouts in Digital Markets: Lessons from B2B Exchanges - California Management Review Vol 45, No. 2 – Winter 2003
0
200
400
600
800
1000
1200
1400
1600
93 94 95 96 97 98 99 00 01 02 03 04
Number
of
Online
Marketplaces
Venture
Capitalists froze
investments in
April 2000
Peak in B2B
market was
February 2000
31. Slide 31 ©2009 GXS, Inc.
But they didn’t come…
By 2004 there were fewer
than 200 B2B e-
Marketplaces
32. Slide 32 ©2009 GXS, Inc.
NASDAQ through Dot Com Era
Over $5 Trillion in
Market Value was lost
in the Tech Sector
33. Slide 33 ©2009 GXS, Inc.
“A Period of Irrational Exuberance”
Alan Greenspan
34. Slide 34 ©2009 GXS, Inc.
The Most Popular Dummies Book…
Realizing the Flawed
Assumptions about
B2B e-Marketplace
Growth Potential -
Investors Fled
But Most were Too
Late to Sell their
Positions in
Marketplaces
36. Slide 36 ©2009 GXS, Inc.
Supplier Resistance
Suppliers viewed
reverse auctions as a
mechanism simply for
reducing price.
Auctions did not
provide sufficient
weighting to quality,
capacity, service,
performance.
37. Slide 37 ©2009 GXS, Inc.
Lack of Liquidity
Consequently, many
suppliers did not
participate in
marketplace auctions.
The result was a lack of
liquidity for buyers and
a lack of transaction
fees for exchanges.
38. Slide 38 ©2009 GXS, Inc.
Not Popular with Suppliers
Suppliers viewed reverse
auctions as a mechanism
simply for reducing price.
Suppliers believed that
auctions did not provide
sufficient weighting to
quality, capacity, service,
performance.
Consequently, many did
not participate in auctions
Supplier’s
Reaction to
Reverse
Auctions
39. Slide 39 ©2009 GXS, Inc.
Good for Pencils, but Not Engine Parts
• Liquidation of excess merchandise
• Hard to find electrical components
• Indirect procurement of MRO goods
• Based on more than price
• Quality, service, capacity,
performance
• Requiring more extensive
analysis
Marketplaces worked for:
But most Purchasing was:
40. Slide 40 ©2009 GXS, Inc.
Consortia Lacked Neutrality
• Gain participation of non-
equity members
• New trading communities
• Sharing sensitive pricing
and product information on
competitor owned platform
• Paying transaction fees that
flowed back to competitors
Growth Depended Upon:
Non-Equity Members feared
41. Slide 41 ©2009 GXS, Inc.
Lack of Integration
Marketplaces had no links to
• Product Catalogs
• Order Fulfillment
• Transportation Management
• Invoice Processing
• Clearing & Settlement
Lack of Integration to
Fulfillment, Clearing
and Settlement
Systems Lowered ROI
42. Slide 42 ©2009 GXS, Inc.
Culture & Relationships
• Long-standing personal
relationships, which were
difficult to disrupt
• Threatened to disintermediate
brokers, distributors,
wholesalers with power
• Middle aged buyers and
suppliers must switch from
phone to electronic approaches
E-Marketplace Vendors
Under-Estimated
44. Slide 44 ©2009 GXS, Inc.
Perhaps they Succeeded….
There remains a general
level of disappointment and
remorse with the e-
marketplaces…
…But we should remember
that these organizations
were catalysts for a number
of high value supply chain
technologies still in use
today.
Minnesota Pension Fund Manager whose
portfolio lost millions in e-Marketplaces
45. Slide 45 ©2009 GXS, Inc.
Powering Today’s Supply Chains
Buy Side E-
Procurement
Sell Side Order
Management
Excess Inventory
Liquidation
Reverse
Auctions
Product
Catalog
Collaborative
Demand Planning
Logistics
Management
Supplier
Portals
46. Slide 46 ©2009 GXS, Inc.
E-Procurement Market
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2004 2005 2006 2007 2008 2009
US
Dollars
(Millions)
Source: Forrester Research - September 2008 “Holistic View: The e-Purchasing Software Market”
Steady Double
Digit Growth
47. Slide 47 ©2009 GXS, Inc.
E-Sourcing Market
$0
$200
$400
$600
$800
$1,000
$1,200
2004 2005 2006 2007 2008 2009
US
Dollars
(Millions)
Source: Forrester Research - September 2008 “Holistic View: The e-Purchasing Software Market”
Steady Double
Digit Growth
49. Slide 49 ©2009 GXS, Inc.
Private Marketplaces were the Winners
Private Marketplaces
50. Slide 50 ©2009 GXS, Inc.
A handful of the consortia
have been successful by:
Loyalty from customer-owners
Merging with other exchanges
Expanding into new product lines
51. Slide 51 ©2009 GXS, Inc.
Covisint – Planning $1B IPO
“Compuware Corp. hopes to raise at least $1 billion in an
initial public offering of its Compuware Covisint subsidiary
and has hired Morgan Stanley, the New York-based
investment banker, to study the IPO’s feasibility.”
http://www.crainsdetroit.com/article/20071029/SUB/310290010#
October 29, 2007
52. Slide 52 ©2009 GXS, Inc.
Covisint hires former Detroit Mayer
http://www.crainsdetroit.com/article/20090212/FREE/902129972
February 12, 2009
Kwame “Kilpatrick is going to
work as an account executive
for Compuware Covisint, a
subsidiary of Detroit-based
software company Compuware
Corp., concentrating on the
health care industry, the Detroit
Free Press reported, citing a
company memo.”
53. Slide 53 ©2009 GXS, Inc.
e2open – Record Growth in 2009
http://www.e2open.com/news/article/e2open-experiences-35-percent-growth-in-first-half-of-fiscal-year-2010/
54. Slide 54 ©2009 GXS, Inc.
Learn More
On the Edge
Podcast Recording
Ten Years after the
B2B e-Marketplaces
Ten Reasons why the
Marketplaces Failed
http://blogs.gxs.com/keifers/2009/11/ten-
reasons-the-b2b-e-marketplaces-failed.html
http://blogs.gxs.com/keifers/2009/10/b2b-e-
marketplaces-a-look-back-ten-years-later.html
http://www.gxs.com/tradinggridradio