delphi b2b summit amelia island plantation amelia island, florida november 29 - december 1, 2000...

Copyright © 2001 Stratvantage Consulting, LLC 1

DelphiB2B Summit

Amelia Island Plantation Amelia Island, Florida

November 29 - December 1, 2000

Boom or Gloom? The Future of B2B

Exchanges

Twin Cities Electronic Commerce Forum

May 9, 2001Mike Ellsworth

Stratvantage Consulting, LLC


DelphiB2B Summit



Agenda

• Current State of B2B Exchanges• The Current View: Trends for B2B

Exchanges• Near Term: Opportunities and

Consolidations• Mid Term: Competition, Extinctions, the

X2X Future• End Game: The 21st Century Supply Chain


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The Elephant

The Blind Man Assesses the B2B Marketplace


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Current State of B2B Exchanges

• More than 1500 different industry-specific marketplaces

• Three main types of Exchanges:– Public Exchange – independent– Captive Exchange – controlled by

gorillas – COBAMs– Private Exchange –

proprietary


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The Current View: Trends for B2B

Exchanges• Growth?

– Industry analysts predict 2,000 to 10,000 marketplaces by the end of 2003

• Or Crunch?– AMR Research predicts the more

than 600 Exchanges today reduced to 50-100 in 2001


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1998 1999 2000 2001 2002 2003 2004 2005

The Current View: Three Waves

• McKinsey identifies three waves of B2B:– Independent dotcom exchanges

(PaperExchange, eSteel)– COBAM buyer-led or seller-led exchanges

(Covisint, WWRE, Novopoint)– Back to basics: source procurement based

on type of goods • Public Exchange for commodities• COBAM for industry-specific• Extended supply chain for custom or direct

goods


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Myth vs. Reality

• The Myth that the Exchange is the Thing– Focused on purchasing MRO or commodities– Emphasis on transactions and prices

• Reality:– Technology developed for B2B e-commerce

will have unanticipated effects – There’s much more to B2B than

procurement• Content, Collaboration, Process Automation

– There’s more to procurement than indirect materials


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Supply Chain = Value Chain

“It's about connecting the existing buyers and sellers. So it's not a disintermediation play at all. In fact, you're taking people who are doing business today and allowing them to do it more efficiently. You need the existing players. You partner with them rather than compete with them.”-- David Perry, CEO, Ventro


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Myth vs. Reality

• The Myth of Disintermediation– “Online beats offline, clicks beat bricks,

surf beats turf, e-tailing beats retailing” – Bricks and Mortar (BAM) companies are at

a disadvantage

• Reality:– You cannot replace an intermediary

without (at least) replacing or (at best) improving on its functions

– Amazon is building warehouses


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Myth vs. Reality

• The Myth of Hands-Off Regulators– Online transactions not taxed – for

now– Competitors can cooperate in

creating exchanges

• Reality:– FTC held workshop May 7 - 8– Government approved Covisint but

still worries about collusion


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XBasics: Value Chain A Two Sided Coin

• Exchanges not willing to partner with, replace or improve the functions of intermediaries will not survive

• Intermediaries who are not providing value will be replaced– Example: XSAg vs. agricultural

distributors


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The Future of Exchanges


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No One Dares Look Beyond 2006

• Delphi Group: – 90% of Fortune 1000 join a trading

community by the end of 2001

• U.S. SBA: – small business

e-commerce sales to $300 billion by 2002


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• Forrester: – Companies will spend $5.4 million to

$22.9 million each getting connected to exchanges through 2006

– Internet hosting to $16.8 billion in 2002– B2B services to $228 billion market by

2003– Banner advertising to $720

million in 2003– trade via real-time models will

reach $746 billion in 2004


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• Morgan Stanley Dean Witter: corporate goods obtained through auction to 5 percent by 2003

• Yankee Group: marketplace transactions $850 billion by 2004


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In Fact, It’s Insane . . .

• With the rapid pace of change, it’s insane to look beyond 6 to 12 months . . . That’s long range planning!


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Let’s Take a Look at the Next 10 Years


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X2X Timeline

2001 2002 2003 2004 2005

FCC E911 Mandate

Gartner: 600M mobile phones; 40% workforce mobile

Delphi: 90% F2000 trading online

US SBA: SME ecomm $300B

Forrester: hosting $16.8B

Internet out of addresses

Wireless: 3G EDGE in practice

MSDW: corp goods @ auction = 5%

Forrester: B2B services $228B

IDC: 70% of SME online; 2.9M selling

Keenan Vision: $1.6T in tx; 63.4 public

Gartner: $7.3T in spending

Gartner: entire supply chain automated

4G wireless networks @ 5 – 10 Mbps


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XTrends

• Powerful Net Edges (P2P)

• Wireless – WAP, MIX• Devices/PDAs• Bluetooth/Wireless

Payment• Storage on Net• Bandwidth

Explosion/IPng• Personalization/

Profiling

• Position-based services

• Portal Power Wanes• Content

Management• Change

Management• Syndicated Market

Research• X2X Connectivity


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XTrend: It’s the Supply Chain, Stupid!

• “We believe that the next wave in supply chain management or B2B is about to be rolled out. We expect the next wave to reduce retailers net investment in inventory to near zero, pull inventory out of the channel reducing markdown pressures and transaction costs, and substantially reduce out of stocks.”Source: Donaldson, Lufkin & Jenrette


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Case in Point: Scan Based Trading

• Pay When You Sell, Not When You Buy

• Retailers only pay for merchandise after it has been purchased by a customer and scanned at the cash register


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Impact of Supply Chain Efficiency

• Retailers will finance their inventory with payables

• Other implications:– reduction in shrink potential– improvement in inventory flow– reduction in inventory– reduced inventory handling

costs

• Vendors will benefit from better information flow from the retail store, helps them better plan inventory


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What Made This Possible?

• The same technology that enables Exchanges

• Under EDI, implementing SBT too expensive and cumbersome

• XML applications allow for substantially reduced transaction costs


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Where’s the Exchange?

• Where’s the stand-alone Exchange in this scenario?

Maybe nowhere


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Where’s the Exchange?

• GartnerGroup estimates there may be as many as 30,000 private exchanges in various stages of development today


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A Rosy B2B Future?

• GartnerGroup estimates $7.3 trillion in global corporate spending in 2004, up from $145 billion last year

• By 2005, "the entire supply chain between suppliers and buyers will be automated”


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Future Supply Chain

The entire supply chain between suppliers and buyers will be automated!!

How?


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X2X Drivers: Exchange Truisms

• The market seeks efficiency• On the Internet, everything devolves to free• Belonging to many Exchanges and paying

many fees is not efficient• Only those intermediaries with a compelling

value proposition will not be disintermediated• Devolutionary pressure will

strip revenue potential from the Exchange market


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2001: Network Effects

• Private Exchanges threaten to take over– Evolution of collaborative extranets– Captive supply chain– Private RFQ process to keep

competitive secrets– Suppliers will need

interoperability with hundreds of customers


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2002-2005: Consolidation

• Digital Darwinism– Hundreds of Exchanges consolidate –

through attrition and merger – into dozens

• X2X: Integrate with other marketplaces– Seamlessly interconnect– Single log on


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2006 - 2008: Regulatory Effects

• X2X peaks• Independent Exchanges are

favored• Gorillas have tasted the fruit of

their own Exchanges• Gorillas vow to own their

supply chains


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2008 - 2011: Seamlessness

• Just as the stand-alone PC will disappear into your environment, the Exchange will disappear into normal business practices

• By 2010 there are few stand-alone exchanges; there’s just trading

• X2X submerges into the global business net


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Thank You

Mike EllsworthStratvantage Consulting, LLC

Internet strategy and permission marketing

[email protected]

delphi b2b summit amelia island plantation amelia island, florida november 29 - december 1, 2000...

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