Integrate, collaborate, communicate, say operators

The major SA e-marketplace operators are aware that their varied business models are causing confusion in a market already resistant to change in procurement practices and suspicious of the viability of operators.

A lack of bandwidth in SA is a stumbling block

MarketSite Africa, ,

In addition, the market does not always understand the costs involved in complex supplier, content and catalogue enablement. For many, joining an e-marketplace appears to be something of a "grudge purchase", in which the long-term benefits look tempting but immediate return on investment is elusive. Some buyers and suppliers still have ineffective IT infrastructures. For buyers, the costs involved in participating in an e-marketplace can be prohibitive, unless they are shared, say the operators. Integration between marketplaces and the systems used by buyers and suppliers must happen, they say.

Miraculum reports that there is widespread market scepticism about e-procurement technology and e-marketplaces, which is fuelled by the economic slowdown and the failure of dot-coms. In addition, says the company, lack of technology adoption by most buyers and suppliers, and resistance to change in procurement divisions of major corporates put a spanner in the works of e-marketplace progress.

M-Web CommerceZone also feels that market uncertainty is making potential customers extra cautious in selecting a business-to-business (B2B) service provider. B2BAfrica, which points out that it is not an e-marketplace operator, agrees.

The company says that in addition to market caution, operators face infrastructure issues, such as bandwidth, Internet readiness and scalability of architecture.

MarketSite Africa seconds the view that a lack of bandwidth in SA is a stumbling block. This, it says, is compounded by the poor infrastructure used by some suppliers. There also appears to be a lack of understanding of the services that an e-marketplace can offer. The biggest challenges for suppliers, says MarketSite Africa, include maintaining current accounts while attracting new business by making products and services available cost-effectively through more channels, and having the ability to create an electronic catalogue once only, publishing it in a variety of formats.

The major e-marketplace operators point out that buyers face a gamut of problems on the road to participating in e-marketplaces - the most crucial of these relating to finance. The initial costs involved seem high, and often involve upgrades to technology in use within the buyer`s organisation. The projects may essentially be seen as a "gamble", with no proven return on investment and questionable effectiveness. The operators point out that costs of participation could be reduced through sharing.

[CHART]M-Web CommerceZone stresses that selecting a solution provider could determine what problems buyers face. "If the marketplace is supplier-driven - with almost no costs on the buyer side - buyers should understand that they might be locking themselves into a system dictated to by suppliers," the company says. "The question should be: What would the cost to me be if I come onto this platform and not use any of the suppliers you represent? In addition, the solution provider must be able to make a living, otherwise the desperate price structures some of them are now putting on the table to try and secure a foothold in the market, could be a very clear pointer to the eventual demise."

B2BAfrica points out that buyers will see little benefit until there is a critical mass of suppliers online and supplier enablement processes are complete.

Another major challenge to buyers is internal acceptance of an e-marketplace solution. Procurement departments may be deeply suspicious, employees will resist if they perceive the new system as a threat, and management may unrealistically expect instant measurable benefits.

Participants agreed that overcoming these problems requires effective change management and effective integration into financial and other systems.

Suppliers face their own set of challenges in the e-marketplace arena. The operators see disparity in various business models and technology as being among the main problems facing suppliers.

[CHART]M-Web CommerceZone sees fragmentation of the B2B value proposition as a major challenge for suppliers. The company says some incumbent enterprise resource planning (ERP) suppliers that are not aligned with a marketplace, may use their position of trust to convince their customers that they do not have to go through a marketplace to their suppliers, but can rather create their own B2B exchange behind their firewalls. While the customers want the so-called control such a step will give them, they are not told that this means their suppliers will have to incur the cost of interacting differently with each customer that goes this route. The cost of establishing and maintaining the infrastructure, connectivity and cataloguing increases significantly and the supplier has no option but to include that cost in his cost of sale to the customer.

According to M-Web CommerceZone, this threatens to destroy the benefits marketplaces can provide. It warns that if left unchecked, this could do to the B2B industry exactly what made electronic data interchange (EDI) ultimately too expensive and inefficient to be viable.

Operators such as B2BAfrica, Scion and Telkom point out that creating and enabling catalogues are also major supplier challenges. Multiple marketplace subscriptions are another headache, they say.

Each operator is enthusiastic about the potential for B2B exchanges, agreeing overall on the basics of what an e-marketplace should be - virtual transacting and exchange around a common industry or interest.

[CHART]M-Web CommerceZone, MarketSite Africa, Scion and Intershop describe a B2B e-marketplace as an Internet-based platform that enables large, medium and small corporations to exchange goods, services and information.

MarketSite Africa adds that an e-marketplace supports complex business processes online, resulting in greater efficiencies and cost savings for all participants through a number of services. Among other services, the company says it offers routing and distribution of purchase orders from buyers to the relevant suppliers.

Miraculum says an e-marketplace is an electronic environment created to facilitate trading between suppliers and buyers for the purposes of procurement and sourcing. These, it says, can be vertical, horizontal, private and/or public environments.

B2BAfrica and Telkom point out that the functionality of an e-marketplace may vary according to the industry sector, but say the basic principles remain the same.

Quadrem, a vertical marketplace for the mining, minerals and metals industry, aims to create an open, independent, global procurement and services e-market that will yield sustainable value for buyers and suppliers.

ITWeb`s survey asked top players to give their views on the market leaders in the e-market space. While opinions on who leads are as varied as the business models in use, Commerce One and Quadrem are perceived by the industry as strong contenders for the title of market leader.

B2BAfrica says it competes directly with all e-procurement vendors and e-logistics providers. The company sees Commerce One as the e-marketplace leader in SA. Commerce One SA`s MarketSite Africa also sees itself as the market leader, listing Quadrem, B2BAfrica, Telkom and Standard Bank`s thetradestandard as its direct competitors.

ASE Communications, the local Intershop agent, views Commerce One and SAP as market leaders. ASE says it competes directly with "mainstream best-of-breed marketplace vendors such as Commerce One and Ariba; ERP vendors such as SAP and Oracle; and application service providers such as Miraculum.

TradeWorld, which services the horizontal trade arena, says itfacilitates over a million links between buyers and suppliers nationwide, every month, with the combination of MarketSite Africa and Ezeedex as its closest competitor. TradeWorld sees Quadrem as the marketleader in vertical marketplaces, while it says that in strategic procurement services, Miraculum is the market leader in purchasing aggregation.

Scion competes directly with Miraculum, thetradestandard, TradeWorld, CyberTrade and ProcureTrade, and sees the market leaders as BUYit and BILLit, followed by CyberTrade.

Telkom Business Integration Services, which operates CyberTrade Xchange, says it does not believe that a true market leader has emerged yet, because the industry is fairly new. Telkom has been participating in electronic commerce for a number of years and says it processes more than one million transactions per month. "Our offering includes a generic e-procurement and supply chain management, which can facilitate both direct and indirect trading. In light of this, most of the players in the market are in competition to CyberTrade Xchange. It is anticipated that this market will consolidate [...] in the near future."

Scion agrees: "SA cannot sustain more market sites."

Operators agree that e-marketplaces can offer myriad benefits - if they can stay in business long enough.

M-Web CommerceZone says one of the challenges all marketplaces will have to face is their ability to offer a so-called "full value solution". This, it says, means that online e-procurement should be integrated with online supply chain management tools pertinent to each vertical market. Only once this has been done successfully, can one really talk about vertically integrated portals, or "vortals".

Despite the fierce competitiveness of the B2B market, operators believe that marketplaces should cooperate, sharing information and allowing various applications to "talk" to one another. Says TradeWorld: "Imagine if cellphone networks never allowed you to call between networks?"

M-Web CommerceZone agrees: "Integration between marketplaces must happen."

Scion believes it will happen, and it will be driven by business: "The models are there - the cellphone operators are doing it, Visa and MasterCard are doing it, the banks are switching cheques. The models are there; it`s just the timing that wasn`t right. Until now, the vendors of e-market sites have been extremely arrogant, assuming they can take the whole market. They weren`t interested in a model of collaboration. But the bottom has fallen out and now they are more than interested to collaborate."