Nov. 2003Nov. 2003

Group 2Group 2B2B ExchangesB2B Exchanges

Timothy BrasherTimothy BrasherTamira D. MeierTamira D. Meier

Stephen P. NicholasStephen P. Nicholas

www.neonultra.com/b2b_b2c_b2g.htmwww.neonultra.com/b2b_b2c_b2g.htm

B2B ExchangeB2B Exchange

Worldwide: B2B market for services projected to Worldwide: B2B market for services projected to grow from $403 billion (2000) to between $2.4 to grow from $403 billion (2000) to between $2.4 to $7.29 trillion (2004) $7.29 trillion (2004)

B2B e-commerce represents 7% of forecasted B2B e-commerce represents 7% of forecasted $105 trillion of total global sales transactions$105 trillion of total global sales transactions

All businesses will eventually buy on, sell on, All businesses will eventually buy on, sell on, host on or be marginalized by an exchangehost on or be marginalized by an exchange

www.emarketer.comwww.emarketer.com

B2B ExchangeB2B Exchange

Forecasted B2B Revenues WorldwideForecasted B2B Revenues Worldwide

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What is a B2B Exchange?What is a B2B Exchange? An e-marketplace where buyers and sellers exchange An e-marketplace where buyers and sellers exchange

goods and servicesgoods and services Purchase mechanisms – one of the following:Purchase mechanisms – one of the following:

* Auction* Auction * Reverse Auction* Reverse Auction* Aggregate Auction* Aggregate Auction * Catalogs* Catalogs* RFQ/RFP* RFQ/RFP * Matching buyers & Sellers* Matching buyers & Sellers* Value-Added Services* Value-Added Services

Examples of services:Examples of services:* Portal* Portal * Workflow Management* Workflow Management* Application Rental* Application Rental

B2B exchanges produce revenue via membership and B2B exchanges produce revenue via membership and subscription fees, transaction fees or some combination subscription fees, transaction fees or some combination

B2B ExchangeB2B Exchange

A B2B exchange is a cooperative among businesses A B2B exchange is a cooperative among businesses where each corporation shares resources of where each corporation shares resources of critical critical commoditiescommodities Critical commodities provide incentive to: Critical commodities provide incentive to:

collaboratecollaboratereduce costs reduce costs share gainsshare gains

CONTRIBUTIONCONTRIBUTION COMMODITYCOMMODITY DIFFERENTIATORDIFFERENTIATORCRITICALCRITICAL Critical CommoditiesCritical Commodities *** *** Critical Critical

Differentiators ***Differentiators ***

USEFULUSEFUL Useful CommoditiesUseful Commodities Eliminate/MigrateEliminate/Migrate

Lacity, Mary, and Willcocks, Leslie, Global Information TecLacity, Mary, and Willcocks, Leslie, Global Information Technology Outsourcing: Search For Business Advantage, Johnhnology Outsourcing: Search For Business Advantage, John

B2B ExchangeB2B Exchange

Potential competitors reduce costs through Potential competitors reduce costs through shared industry ventures (critical commodities)shared industry ventures (critical commodities)Supply Chain Management:Supply Chain Management: Web based trade exchange for procurementWeb based trade exchange for procurement Component suppliers bid via exchangeComponent suppliers bid via exchange Preferred supplier vs. open bidding?Preferred supplier vs. open bidding? Just in Time (JIT) inventoryJust in Time (JIT) inventory

Fixed Fixed networks vs. networks vs. virtualvirtual networks networks

www.covisint.com/cgi-binwww.covisint.com/cgi-bin

B2B ExchangeB2B Exchange

Value-Added BenefitsValue-Added Benefits Economies of scale - cut IT development and Economies of scale - cut IT development and

operating costsoperating costs Scalable common industry interfaceScalable common industry interface Cut deployment costsCut deployment costs View real-time dataView real-time data Increased visibility across supply chainIncreased visibility across supply chain Security/data integrity (128 bit encryption)Security/data integrity (128 bit encryption)

http://search.epnet.com/direct.asp?an=5271260&db=afh">Thttp://search.epnet.com/direct.asp?an=5271260&db=afh">The Dynamics of B2B E-Commerce.</he Dynamics of B2B E-Commerce.</

Three Categories DefinedThree Categories Defined

ConsortiumConsortium One or more business organizations pool leading One or more business organizations pool leading

vendors or buyers in a particular industryvendors or buyers in a particular industry

Public ExchangesPublic Exchanges Run by third party, open to all companies that meet Run by third party, open to all companies that meet

standardsstandards

Private MarketplacesPrivate Marketplaces Run by a single company and it’s key suppliersRun by a single company and it’s key suppliers

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Three Categories of B2BThree Categories of B2B

ConsortiumConsortium Global Food ExchangeGlobal Food Exchange CovisintCovisint

Public ExchangesPublic Exchanges Commerce OneCommerce One

Private ExchangesPrivate Exchanges Wal-Mart and DellWal-Mart and Dell FuelQuest, Inc.FuelQuest, Inc.

neonultra.com/b2b_b2c_b2g.htmneonultra.com/b2b_b2c_b2g.htm

Horizontal ExchangeHorizontal Exchange

Horizontal Portal ExchangesHorizontal Portal Exchanges Provides specializes services across Provides specializes services across severalseveral

industries.industries.Example: SteelNet.comExample: SteelNet.com

SalesinfoSalesinfo MarketsMarkets SuppliesSupplies

Supplied to customers across multiple domainsSupplied to customers across multiple domains

neonultra.com/b2b_b2c_b2g.htmneonultra.com/b2b_b2c_b2g.htm

Vertical ExchangeVertical Exchange

Vertical Portal ExchangesVertical Portal Exchanges Provides a set of services across a Provides a set of services across a singlesingle

industryindustryExample: VerticalNet.com Example: VerticalNet.com

TechnologyTechnology CommunicationCommunication EnvironmentalEnvironmental Healthcare/ScienceHealthcare/Science

Biosearch.com: biotechnology/life scienceBiosearch.com: biotechnology/life scienceDrugdiscoveryonline.com: pharmaceutical industryDrugdiscoveryonline.com: pharmaceutical industry

Case StudiesCase Studies

CovisintCovisint Automotive IndustryAutomotive Industry

FuelQuest, Inc.FuelQuest, Inc. Petroleum IndustryPetroleum Industry

FreeMarkets.comFreeMarkets.com Industrial Goods & Services Industrial Goods & Services

Nov. 2003

www.covisint.com

Covisint Case Study

• Who Are They?• Background Information• What Do They Do?/Services• Benefits of Their Services

• Case Study Conclusions

Nov. 2003

www.covisint.com

Covisint

• The Global independent e-business environment for the automotive industry.

• Mission: Provide services that connect trading partners and improve their interactions within their supply chain.

Nov. 2003

www.covisint.com

Who is Covisint?

• Covisint is the technology services company whose business-to-business applications and communication services connect the global automotive industry.

• They provide their customers with a common connection to suppliers, manufacturers and dealers in the automotive industry.

Nov. 2003

www.covisint.com

Background

• Founders:• Covisint was formed by

DaimlerChrysler, Ford, General Motors and Renault-Nissan. – PSA Peugeot Citroen has

also joined the initiative.

Nov. 2003

www.covisint.com

Background• Began Providing Services

– US – January 1st 2001– Europe, Asia Pacific, and Latin

American- July, 2001• Locations

– HQ – Southfield, MI– Amsterdam– Tokyo– Frankfurt– Paris– Brazil

Nov. 2003

www.covisint.com

Covisint’s Background

• Industry Participants (Suppliers)

Nov. 2003

www.covisint.com

Covisint’s Background

• Technology Partners

• Technology Providers

Nov. 2003

www.covisint.com

Covisint’s Services

• What do they do?– Works with manufactures, suppliers and

industry trade groups worldwide to define and implement effective common processes for the industry.

• Goals– Reduce costs– Increase efficiency– Enhance quality– Improve time to the market

Nov. 2003

www.covisint.com

Covisint’s Services

• Procurement• Quality• Portal

Nov. 2003

www.covisint.com

ProcurementCovisint Procurement dramatically reduces the

amount of time needed to complete sourcing activities.

• Auctions:– Becoming e-Enabled – Process Savings – Price Savings – Improved Decision Making – Benefits to both Buyers and Sellers – Return on Investment

Nov. 2003

www.covisint.com

Procurement

• Covisint Catalogs– Reduced Purchasing

Costs– Controlled Buying– Process Savings– Lower Overhead

Costs

Nov. 2003

www.covisint.com

Covisint Quality

• Covisint's Quality Solution Suite – provides industry standard web based tools to drive

and accelerate product and process quality improvements through enhanced execution of quality planning and management across the supply chain

• Problem Solver– To coordinate and manage problem solving

between customers and suppliers

Nov. 2003

www.covisint.com

Covisint QualityCustomer Benefits:

• Decrease administrative cost and increase employee efficiency – reducing the paperwork expended in

communicating problems to their suppliers • Improve product quality and decrease costs from

faster problem communication and thereby faster resulting corrective actions.

• Evaluate supplier performance and identify opportunities for continuous improvement.

• Enables the process of implementing a secondary inspection process to ensure the delivery of quality parts.

• Provides an easy means to record and recover the financial consequences of quality problems.

Nov. 2003

www.covisint.com

Covisint QualitySupplier Benefits

• Provides an industry standard method for responding to customer problems.

• Speeds resolution process through quicker and better understanding of the issues.

• Continuous quality improvement due to improved knowledge of the patterns of issues.

• Provides a customer accepted solution to a quality problem.

• Provides the means to track the cost of bad quality.

• Electronic ability to accept or challenge costs.

Nov. 2003

www.covisint.com

Covisint Portal• The Covisint Portal allows industry participants

to access OEM applications, Supplier applications, and Covisint applications via one common framework.

• Reduce IT and development costs• Leverage Internet and automotive industry

standards• Cut Deployment costs• Increase visibility across supply chain• Best in-class security• Integrating applications

Nov. 2003

www.covisint.com

Covisint Portal

• CSM: Global Market intelligence and forecasting services

• HCI Group LTD: International Business Resource Journals services and products

• Asia Talk, Euro Talk, Ameri Talk

Nov. 2003

www.covisint.com

Covisint Portal128 bit encryption

• Security: Third party security certification by Trust Services.

• Audits validity, security, integrity, and maintainability

Nov. 2003

www.covisint.com

Portal

• My Workspace: customized views of information – mix and match information from multiple companies into comprehensive view.

Nov. 2003

www.covisint.com

GROWTH

• Covisint: continues path of acceleration membership growth (253%)

• 77,000 active users in over 15,000 companies

Nov. 2003

www.covisint.com

Covisint: Is it working?

• Daimler Chrysler AG– “e –procurement” 10 billion euros 2001– Online bidding (5/2001) 3.5 billion Euros– “e-shop” online catalog reduce process costs by 50%– “e- docs” shared document– “Fast car” automotive development

Nov. 2003

www.covisint.com

COVISINT

• “The supplier portal supports our vision for an electronically-linked supply chain and will help DELPHI to support our customers requirements for responsiveness.”

J.T. Bohgbey CEO DELPHI

Nov. 2003

www.covisint.com

Covisint

• “Since launch we have responded to customer demands with flexible solutions that address their critical business needs and connect their supply chains. IT is the focus that has led to reductions in inefficiencies in our customer’s supply chains and enabled us to succeed where other exchanges have failed.”

Bruce Swift President and CEO of Covisint

Nov. 2003

www.fuelquest.com

FuelQuest Case Study

• Vision• Background• Services• Conclusion

Nov. 2003

www.fuelquest.com

FuelQuest Vision

• Lead the charge to transform the businesses of petroleum suppliers, marketers, and large petroleum buyers into service-driven, technology-savvy, and Internet-enabled industry leaders intent on winning market share and growing profits.1

Nov. 2003

www.fuelquest.com

FuelQuests’ Background

• Independent• First transaction October 1998• Industry leader in on-line petroleum sales

– Provided first web-based business-management solution for petroleum marketers

Nov. 2003

www.fuelquest.com

FuelQuest Services

Provides and hosts web-based supply chain integration and collaboration technologies for the downstream petroleum industry.

Applications support procurement, management and sales of fuels and lubricants

Focus areas: price management, strategic sourcing, logistics optimization, remote inventory monitoring e-Procurement, and automated tax compliance

Nov. 2003

www.fuelquest.com

Capital Partners• CIBC Capital Partners

– Merchant Banking Group– Venture Group– Private Equity Funds Group– Strategic Investments

• EnerTech Capital• Lehman Brothers Venture Capital Group • TechQuest Capital Partners, LLC

Nov. 2003

www.fuelquest.com

Clients

• Over 900 Clients– Large Commercial

Users & Retailers

                                                

Nov. 2003

www.fuelquest.com

Suppliers and Refiners

Nov. 2003

www.fuelquest.com

Distributors & Marketers

Customer base: Over 650 small to medium size businesses

Nov. 2003

www.fuelquest.com

Alliances

AIMS Accenture DM2 Software, Inc. Sun Microsystems

Microsoft Cisco IBM Oracle

Technology

Nov. 2003

www.fuelquest.com

Alliances

• Accenture• FuelAccess • b2b Solutions

Marketing• Meridian Associates, Inc.• FTA • Petroleum Marketers

Association (PMAA)

Industry

Nov. 2003

www.fuelquest.com

FuelQuest Solutions

• Supply Chain Management• eCommerce and Portals• Tax Automation• Consulting Services

Nov. 2003

www.fuelquest.com

FuelQuest Solutions

• Supply Chain Management– Links customers, suppliers, terminals, warehouses,

distributors, carriers, and trading partners in one virtual enterprise.

• Replaces manual or linear SCM models– Circular model offers greater interaction, responsiveness, and

cost savings.

Nov. 2003

www.fuelquest.com

FuelQuest Solutions

• eCommerce and Portals– Effectively sell and service existing customers with

online access to services and products– Reduce time to get business critical information to

dealers and distributors from one to seven days– Decrease overall mail sent to dealers, jobbers, and

distributors by at least 70%– Draw from existing applications for an inventory

report, or provide a new capability hosted entirely by the Portal

Nov. 2003

www.fuelquest.com

Supply Chain Process

Nov. 2003

www.fuelquest.com

FuelQuest Solutions

• Tax Automation– ZyTax providers Excise Tax compliance

technologies and consulting services• Reliable, scalable solutions tailored for any size

business. • Automates invoice calculations and compliance

reporting to local, state, and federal authorities.– Automates motor fuel excise tax calculation and

reporting.

Nov. 2003

www.fuelquest.com

FuelQuest Solutions• Consulting Services

– Professional Services– Integration Service   – Application Development 

Nov. 2003

www.fuelquest.com

Success• FuelQuest remains successful:

– Acts as a hub• Independent marketers have own site

– Site contains news and information– Conduct transactions with their own customers

– Handles pricing on a one-to-one basis, not open bid market

– Online tools support contract business• Support contract business• Automate the RFQ

Nov. 2003

FreeMarket Case Study

• Background• Services• Case Study Conclusion

1=http://www.freemarkets.com/en/freemarkets/default.asp

What is FreeMarket

• “Empowers organizations… with the software, services and information to capitalize on the global economy.”1

• Improve supply management processes

• Expand reach and capabilities of supply mgmt organization

http://www.freemarkets.com/en/freemarkets/investor_relations/main.asp

54

FreeMarkets’ Background

• Company founded 1995• IPO December 10, 1999 (NASDAQ

FMKT)• IPO Price per share $48

http://www.freemarkets.com/en/freemarkets/literature.asp

55

FreeMarket’s Background

• Customers:

                                                

Nov. 2003

http://www.freemarkets.com/en/freemarkets/default.asp56

FreeMarket’s Mission

• “working hand-in-hand with our customers”

• “drive bottom-line benefits for the entire company”

• “providing a broad and deep mix of products and services”

• “offer… practical, configurable set of software and services”

Nov. 2003

FreeMarket’s Services

• Integrated Solutions• Software Solutions• Global Services

Nov. 2003

Integrated Solutions

• FullSource• Supplier Implementation Solution • Spend Visibility Solution • Sourcing Empowerment Package

http://www.freemarkets.com/en/solutions/integrated/fullsource/features.asp

59

Integrated Solutions

• FullSource– getting faster results– minimizing supply risks– building capabilities– tackling tough spend

• Supplier Implementation Solution • Spend Visibility Solution • Sourcing Empowerment Package

Nov. 2003

http://www.freemarkets.com/en/solutions/integrated/supplier_imp/features.asp

60

Integrated Solutions

• FullSource• Supplier Implementation Solution

– Skilled, short term implementation resources– Project Management – Document Collaboration– Repeatable Process Library

• Spend Visibility Solution • Sourcing Empowerment Package

http://www.freemarkets.com/en/solutions/integrated/spend_vis/features.asp

61

Integrated Solutions

• FullSource• Supplier Implementation Solution • Spend Visibility Solution

– Spend data collection– Data cleansing– Ad-hoc and historical analysis to impact

decision making• Sourcing Empowerment Package

Nov. 2003

Integrated Solutions

• FullSource• Supplier Implementation Solution • Spend Visibility Solution • Sourcing Empowerment Package

– Assists buyers and suppliers with outsourcing decision

– Supplier training– Help desk

Nov. 2003

Software Solutions

• FreeMarkets ES™ • FreeMarkets QS™

http://www.freemarkets.com/en/solutions/software/es/default.asp

64

Software Solutions

• FreeMarkets ES™– “..provides your organization with the technology

infrastructure necessary to achieve global supply management excellence.”

– Requirements Management – Supplier Relationship Management– Sourcing Management – Decision Management– Contract Management

• FreeMarkets QS™

http://www.freemarkets.com/en/solutions/software/QS/default.asp

65

Software Solutions

• FreeMarkets ES™• FreeMarkets QS™

– “QS is a comprehensive, full-featured negotiation application that allows you to more fully automate the process of structuring and executing sourcing projects.”

– Multi-Language Capabilities– Multi-Currency Options– Time Zone, Date, and Number Displays

Nov. 2003

Global Solutions

• Application Services• GSM Services• Education Services• Consulting Services

http://www.freemarkets.com/en/solutions/services/application/default.asp

67

Global Solutions

• Application Services– Market Operations Services – FreeMarkets Supplier Training

• GSM Services• Education Services• Consulting Services

http://www.freemarkets.com/en/solutions/services/gsm/Default.asp

68

Global Solutions

• Application Services• GSM Services

– FreeMarkets FullSource– Sourcing Support Desk

• Education Services• Consulting Services

http://www.freemarkets.com/en/solutions/services/ges/default.asp

69

Global Solutions

• Application Services• GSM Services• Education Services

– Sourcing with Online Markets – FreeMarkets QS Training

• Consulting Services

http://www.freemarkets.com/en/solutions/services/consulting/default.asp

70

Global Solutions

• Application Services• GSM Services• Education Services• Consulting Services

– Organizational Transformation– Outsourcing– Low-Cost Country Sourcing

http://quotes.nasdaq.com/quote.dll71

Is it a Success?

http://www.hoovers.com/freemarkets/--ID__59661--/free-co-fin-factsheet.xhtml * http://www.freemarkets.com/en/freemarkets/investor_relations/Q3%202003%20Earnings%20Script.pdf

Is it a Success?2002 2001 2000 1999

Annual Sales ($ mil.) 170.4 147.6 91.3 20.9Annual Net Income ($ mil.) (17.6) (295.2) (156.4) (21.8)

•80% of customers sign long-term contracts•54% of customers purchase multiple products•Profit Margins on renewals and fees are increasing•Reduced cost structure by targeting more specific markets, cutting consulting costs, reducing headcount from 1100 to 1000.

Nov. 2003

Case Study Conclusion

• Freemarkets has landed large, globally-reaching clients = well positioned to accommodate the growing global outsourcing trend

• Good customer service combined with product exclusivity generate revenue through contract renewals

• Survivability rate is high, but growth is too dependent on their niche market

ConclusionConclusion

Hurdles for B2B ExchangesHurdles for B2B Exchanges Financial Concerns - ViabilityFinancial Concerns - Viability

Pricing Pricing Transactions fees/subscriber feesTransactions fees/subscriber fees

Industry specific concernsIndustry specific concerns?Anti-Trust/FTC Regulations (Covisint)?Anti-Trust/FTC Regulations (Covisint)Competitors fears (FuelQuest, Covisint)Competitors fears (FuelQuest, Covisint)

ConclusionConclusion

Hurdles for B2B Exchanges continued:Hurdles for B2B Exchanges continued: Maintain VisionMaintain Vision

Role of CIO/ManagementRole of CIO/ManagementEvolve to meet demandsEvolve to meet demands

Consolidation – Dominant playersConsolidation – Dominant playersVs.Vs.

Multiple/Small Private ExchangesMultiple/Small Private Exchanges

http://archive.infoworld.com/articles/hn/http://archive.infoworld.com/articles/hn/xml/01/06/11/010611hnexchange.xmlxml/01/06/11/010611hnexchange.xml

ConclusionConclusion

Future visionFuture vision By streamlining the business process, By streamlining the business process,

providing hosted applications, and offering providing hosted applications, and offering value-added services such as supply-chain value-added services such as supply-chain management, some exchanges are flourishing management, some exchanges are flourishing in tough times. These successful exchanges in tough times. These successful exchanges have found their niche within a specific have found their niche within a specific industry and have emerged as members of industry and have emerged as members of the winners’ circle.the winners’ circle.