What future for e-Marketplaces?

B2B supplier networks are here to stay, says Alain Andréoli, but there will be fewer of them and they will be bigger, leaner and global.

At a World Internet Centre symposium in Silicon Valley in 2000 one session was entitled: “B2B e-marketplaces and the future of e-commerce: what path will it take?” one path that at least two of the keynote speakers didn’t consider was that it would take them out of business. But that’s exactly what happened. and they weren’t alone.

Between 2000 and 2005 more than 1,000 e-marketplaces sprang up. Today there are about three dozen, with five representing half of the market, including my own, cc-Hubwoo.

So what went wrong? or what went right? Well, like all of these things everyone started with great expectations. Buyers expected to reduce costs by automating processes and, at the same time, increase visibility. Suppliers expected to increase sales by being hot-wired to a purchasing chain – a new sales channel – just a mouse click away.

This was the dream, and if it had come true, the ecommerce landscape might have looked something this: eBay for C2C, €10bn, amazon for B2C, €20bn, cc-Hubwoo for B2B, $30bn…

But it didn’t quite work out like that. C2C and B2C have prospered, as has the e-providers, while B2B has seen a slower ramp, with less prosperity for its e-providers. B2B is happening, has happened – more than five billion euros transit through our platform alone at cc-Hubwoo where our customers represent ten per cent of the total Fortune 500.

However, the total market for B2B marketplaces in revenue, including ourselves, is still something in the range of €300M or slightly less worldwide (including SRM on demand and e-sourcing services, pure play supplier network income may be half). Why is this? What is going to move this space from a long infancy to the same stage of accelerated pervasiveness as the B2C or C2C?

Consolidation is needed for this to become a one billion-plus euros market with two or three global supplier networks within three to five years. the current relative fragmentation still implies that a supplier should connect to several networks.

If there were only a couple – or should I say when there is only a couple – there will be no question that this is the way to go for any Fortune 2000 company, and beyond. Why bother continuing to fulfill a commercial relationship through manual processes when you can integrate the whole procure-to-pay chain around a solid, fast-to-ramp, pervasive supplier network?

The combined value to the buyer and the supplier comes from this consolidated scale effect; fragmented, it prevents some of the obvious benefits from coming to the fore.

Imagine a consolidated marketplace conforming to a uniform standard, with hundreds of thousands of connected active suppliers in each region, in each vertical, and hundreds of buyers from all regions and segments. along with cc Hubwoo, if you factor in Ariba in the US, the number two as per its marketplace activity – the two of us can currently lay claim about 20 per cent oft the other 80 per cent? Where are they? and perhaps more to the point, “Why aren’t they?”

The simple answer is that they are waiting for the obvious choice, the one for which “you never get fired if you select this three letter company” versus a compelling but small provider. they see the value, but they think they can wait until a household name emerges among the B2B supplier networks.

We can provide our prospects with all the metrics, show them the ROI, demonstrate returns – it’s a painfully slow decision-making process – until the solution becomes: “How come you haven’t got an ERP yet in your company, a.k.a a supplier network?” It is our challenge, as an emerging industry, to resolve this fragmentation, so that our buying and supplying customers can join the “club”. We owe the market a simpler choice.

This is a raditional sequence of events in the life-cycle of a new technology. In his book, Diffusions of Innovations, Everett Rogers stated that only 2.5 per cent of adopters of a new innovation or idea could be categorised as innovators, 13.5 per cent as “early adopters”, 34 per cent as “early majority”, 34 per cent as “late majority” and 16 per cent as “laggards.” Where do you belong? I believe the market is just entering the early majority stage. the bell curve is ahead!

We now must feel like a safe value choice, as we prepare for the majority to join. The majority is risk averse, and typically clones its peers. Thus standardisation, most likely through consolidation of the players, will factually increase the scale of the network and, psychologically, remove the perceived risk of migrating its supply chain into a third-party supplier network.

There is a good story to tell about functional coverage, cost-effectiveness and speed-to-deployment – and the “market” is slowly but surely opening.

Consider this real life example for a major utility in the UK. Two hundred suppliers were targeted for on-boarding more than 100,000 transactions over the system with an implementation time of 15-18 weeks to initial technical go-live integration with three separate ERP systems.

It’s impressive by anyone’s standards. As an emerging industry we must translate these good stories into the standard way of doing B2B transactions. It will make it easier for customers to choose on fewer criteria, winning the risk-averse later adopters, precisely where the e-marketplace needs to be ready to cross the chasm.

In my view there are two main levers for future growth. Increasing the network supply base – mass onboarding – and rolling out added-value services – full paperless procure-to-pay automated matching of transaction documents.

We already provide a global enterprise supply network, with an always-on, utility type connection to suppliers with on-demand applications such as catalogue management, buyer-side procurement and supply-side order management, as well as our latest integrated offering in e-invoicing. The market is ready to help this emerging industry consolidate as a basic platform, ultra robust and available worldwide.

Repsol has recently rolled out our new e-invoicing solution and Shell is in the final stages of implementing a new supplier-hosted order management tool for dealing with suppliers who are not able to integrate with its ERP back-office suite.

EDF, the pan-european utility company, uses a private marketplace where users can consult and order products and services available in the e-catalogs of affiliated suppliers ranging from administrative and office supplies to industrial logistics, from tyres to catered meal trays, from individual safety equipment to laboratory material.

In short, by setting ourselves apart from the “utility portal” and positioning ourselves as the enterprise Supply network™ we believe that we are setting out the stall for the future evolution of an e-marketplace – with what few players there will soon be.

I believe that this model – offering the smaller marketplaces, local or regional, horizontal or vertical, the opportunity to think about joining a global family – will help our mutual customers. Having been through five mergers already, we have learnt how to make this work.

Long term, B2B supplier networks are here to stay, fewer, leaner and global. The compelling value to the mainstream mass of businesses will come through the size of the club membership itself. the B2B e-providers have the duty of making this happen through their own consolidation, which will enable the acceleration of the adoption of the model for which the intrinsic value is now demonstrated by many.

Alain Andréoli is President of the Executive Board and Chief Executive Officer at cc-hubwoo.