E-Commerce 2002: B2B Survivors Focus on the Enterprise

The demise of many individual electronic marketplaces in 2001 may have unfairly tarnished the reputation of the overall business-to-business (B2B) e-commerce sector.

While scores of online companies specializing in matching buyers with sellers have perished in recent months, throngs of B2B technologycompanies steered clear of the downswing and havesurvived, and the top companies stand to prosper.

“[E-marketplace providers] assumed that mostpurchasing is done based on price alone,” Yankee Groupsenior analyst Jon Derome told the E-Commerce Times.”This is not the case in the business world. Thousandsof factors are involved in purchasing decisions.”

Whether through incumbency, well-aimed product andservice strategies or sheer luck, many B2B technologycompanies have navigated themselves through the worstof the industry shakeout.

Bottom-Line Rules

Many of the B2B technology providers still standing are thosethat use software and services to facilitate criticalbusiness processes like channel partner communicationand collaboration, analysts said.

With tough economic conditions strangling IT budgets, mostbusinesses are looking to leverage their existingtechnology investments.

This has fostered a resurgent focus on the enterpriseand on opportunities to integrate internal processeswith external business partners.

Inside-Out

“We’re seeing an expansion of enterprise resourceplanning (ERP) technology, rather than ‘outside-in’forces like e-marketplaces,” Jupiter Media Metrixanalyst Jon Gibs told the E-Commerce Times. “So wehave existing enterprise investments growing outwardstowards partner relationships.”

Some e-marketplaces may thrive, especially incommodity industries where price is paramount,suggested Derome. But they failed to take hold in manyvertical niches because of weak value propositions.

Missing Links

Technology companies that are tackling the complexitiesof integrating disparate business systems not only have survived, but could prosper, analystsagree.

“We’ll see more channel partner enablement solutions,rather than buyer-centric models,” said Gibs.

“Original equipment manufacturers (OEMs) will workwith distributors and retailers through channelrelationships online, exchanging catalog informationin real time,” Gibs added.

Key companies in this integration arena include Tibco (Nasdaq: TIBX),WebMethods(Nasdaq: WEBM), and Vitria (Nasdaq:VITR).

“New technologies like Web services will reduce thecomplexity involved in machine-to-machinecommunication, and we’ll move to a more federatedcommerce model,” said Derome.

Special Services

Another characteristic of B2B survivors is the ability to offer a servicecomponent and not just software, said Gibs, citinge-sourcing software and service provider FreeMarkets as aprime example.

The Pittsburgh, Pennsylvania-based firm couplesreverse auction software with extensive supplierevaluation and sourcing services.

Additonally, FreeMarkets delves into direct materialsprocurement, where online automation could createmeasurable long-term value, added Gibs.

Role-Playing

Clear product focus has ushered FreeMarkets and otherB2B technology companies through these precarioustimes, analysts said.

Companies that have focused squarely on businessprocesses such as inventory liquidation, which place the most burden on corporations, have endured, saidGibs.

“We will see fewer grandiose hosted solutions,” saidGibs. “There are many disparate business processes,but it’s questionable whether they should be dealtwith by the same software.”

Cutting to the Core

Consequently, broad-based supply chain managementsoftware vendors such as i2 (Nasdaq: ITWO), Manugistics(Nasdaq: MANU), SAP (NYSE: SAP), and Oracle (Nasdaq:ORCL) may have to fine-tune their offerings, suggestedGibs.

Indeed, New Economy figureheads Commerce One (Nasdaq:CMRC) and Ariba (Nasdaq: ARBA) have trimmed their coreofferings in recent months, de-emphasizinge-marketplace infrastructure and refocusing ondiscrete procurement applications, noted Derome.

Heavyweight Champions

That said, heavy hitters like Oracle, SAP and IBMhave relied on their broad customer bases duringthis downturn to outlast smaller competitors.

In the early days of B2B technology, many small companies introducedwatered-down versions of a product, according to Gibs,only to have long-standing veterans swoop in monthslater with more solid offerings.

As Gibs put it, “Nobody gets fired for buying IBM.”

Unfriendly Economy

What are today’s B2B survivors facing in the monthsahead? More uncertain times, said analysts.

“There’s not a lot of capital available, even forcompanies with good ideas,” warned Gibs.

Real-time collaboration and trading partnerintegration are indeed key opportunity areas, but “these are still risky categories, which won’texperience significant growth until there are signs ofan economic recovery,” added Derome.