Giga Information Group YOUR eBUSINESS ADVISOR EMarketplace Status
® Giga Information Group YOUR e-BUSINESS ADVISOR E-Marketplace Status Update Andy Bartels Vice President and Research Director November 16, 2000 Call in at ? ? : ? ? EDT (1) (973) 321 -1020 Password: ? ? © 2000 Giga Information Group, Inc. All rights reserved. Reproduction or redistribution in any form without the prior written permission of Giga Information Group is expressly prohibited.
Agenda l Segmenting the e-marketplace space: – extranets and private e-markets vs. EDI and ETN networks vs. public e-markets l The dynamics driving e-markets l What will win? l Recommendations for navigating an uncertain landscape Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
The Internet B 2 B E-Commerce Space US Business-to-Business (B 2 B) Internet E-Commerce (Billions) $4, 000 $3, 697 $3, 500 $3, 158 $3, 000 $2, 471 $2, 500 $2, 000 $1, 636 $1, 500 $1020 $1, 000 $611 $295 $500 $0 1998 1999 2000 2001 2002 2003 2004 Web EDI Direct Over Web EDI via Internet ETNs Internet E-Markets Extranets Giga Information Group © 2000 Giga Information Group, Inc. ® Figure 4 YOUR e-BUSINESS ADVISOR
The EDI B 2 B E-Commerce Space US Business-to-Business (B 2 B) EDI E-Commerce (Billions) $4, 000 $3, 352 $3, 412 $3, 500 $3, 137 $3, 255 $3, 030 $2, 908 $2, 984 $3, 000 $2, 500 $2, 000 $1, 500 $1, 000 $500 $0 1998 1999 2000 2001 2002 2003 2004 Web EDI Direct Over Web EDI via Internet ETNs EDI via VANs Giga Information Group © 2000 Giga Information Group, Inc. ® Figure 5 YOUR e-BUSINESS ADVISOR
EDI and Internet Increasingly Overlap B 2 B E-Commerce in 2004 Internet EDI ETNs Internet ($1. 2 Tril. ) Public E-Marketplaces EDI ($1. 3 Tril. ) Direct ($0. 3 Tril. ) Extranets* ($0. 5 Tril. ) EDI with VANs ($1. 4 Tril. ) Web EDI ($0. 4 Tril. ) * Includes Private E-Marketplaces © 2000 Giga Information Group, Inc. Giga Information Group ® Figure 3 YOUR e-BUSINESS ADVISOR
What Are Internet E-Markets? Internet Business Buyers E-Market Business Sellers Extranet E-Market No. 1 E-Market No. 2 E-Market No. 3 E-Market No. 4 Net as Market One/Some -to-Many: One/Some Buyer (Seller) to Many Sellers (Buyers) Aggregator Hub Many Sellers to One Content Aggregator to Many Buyers Broker Hub Many Buyers to One Broker to Many Sellers Collaboration Hub Many Buyers to One Source of Collab. Tools to Many Sellers Translator Hub Many Buyers to One Translator to Many Sellers Marketplace Many Buyers to Many Sellers Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
One-to-Many Extranets Become Some-to-Many Private E-Marketplaces l Companies with successful extranets are adding non-competing complementary suppliers to create a private e-marketplace – Example: Dell’s order system with customers Secondary Business Seller Private E-Market Primary Business Seller l Internet Business Buyers However, some-to-many (like one-to-many) solutions are only sustainable when the one buyer or the one supplier is the 800 -pound gorilla that can force counterparties to do things its way. Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
True Many-to-Many Marketplaces l Lack of standards limits current availability l May emerge if buyers, sellers and vendors can get together to write the common rules for trading in an industry, e. g. , Rosetta. Net Business Buyers Standardized Order-and. Response Formats Business Sellers Internet Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Two Dominant Models for Hub E-Markets Hub e-market ownership is taking two forms in public e-marketplaces. Option No. 1 New Company Option No. 2 Shared Ownership by Incumbents Pros • No baggage • Nimble • Entrepreneurial • Profits to Incumbents • Control to Incumbents • Quick to Scale Cons • Potential Monopoly • Profits to New Entrant • Slow to Reach Scale • Anti-Trust Issues • Distrust by Other Incumbents • Committee delays Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Half of Industry-Incumbent Hub E-Markets Will Fail Industry-incumbent consortia can bring scale and liquidity, but can fail because of: – Anti-trust issues – Sub-scale buyer participation – Competitor conflicts l l Hub site objectives — profit vs. efficiency? Hub site scope — preserving or leveling competitive advantages? Hub site assets — who owns IP, physical assets, management? Hub site technology — whose favorite vendors get chosen? – Resistance from suppliers – Premature commitment to wrong technologies Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Tensions in Internet Hub E-Markets Internet E-Market Business Buyers Business Sellers Buyer Objectives Market Feature Seller Objectives Market Feature 1. Lower prices • Reverse auctions 1. Standardize order flow, avoid commoditization • Aggregated catalogs with punch-out to seller Web site 2. Standardize order flow • Aggregated catalogs 3. Find new suppliers 4. Collaborative planning & forecasting • PO and response conversion • Aggregated catalogs • RFP facilities • SCM-based collaboration 2. Collaborative planning & forecasting 3. Find new customers 4. Move excess inventory • CRM-based collaboration • Supplier search w/ marketing info • Auctions Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Evolution of E-Marketplaces l E-marketplaces will move from supporting purchase transactions to more complex collaborative interactions New Entrant E-Markets Collaborative Planning Transactions Private Extranet E-Markets Industry Consorti a EMarkets Purchase Transactions 2000 2001 2002 2003 2004 Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
E-Marketplace Revenues l l E-marketplaces today are experimenting with a variety of revenue models Increasingly, they will coalesce around a subscription model Today Monthly Subscription Fee (e. g. , Purchase. Pro) AND/OR Sales Commission Paid by Seller (e. g. , 1%-5% for Metal. Site, Chem. Dex) AND/OR Transaction and Listing Fees by Seller (e. g. , Purchase. Pro) AND/OR Percent of Savings Fee by Buyer 2001 Monthly Subscription Fee Tiered by Size Of Participant And Service OR Percent of Savings Fee by Buyer (for Reverse Auctions) (e. g. , Free. Market) Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Growth in B 2 B Internet Commerce via Hub E-Markets Percentage of B 2 B Internet commerce transactions flowing through hub sites Number of transactional hub sites 40% 35% 30% 10, 000 25% 7, 500 20% 5, 000 15% 10% 2, 500 5% 1, 000 0% 0 1999 2000 2001 2002 Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Large Companies Will Use Different B 2 B Electronic Channels l EDI/ETNs/Extranets/Direct Tightly coupled, secure, often proprietary network channels for large and medium company bilateral long-term partner relations l Distributors Or Suppliers Sales Or Purchases 20% 80% Internet E-Markets Loosely coupled, moderately secure Internet-based extranets, hub sites and marketplaces for more transitory partner relations for large, medium and small organizations Distributors Or Suppliers Sales Or Purchases 20% 80% Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
Caveat to the 80/20 Rule: Asymmetry of Strategic Relationships l Not all “strategic” relationships are strategic to both parties. 10% of Sales = Strategic Customer Manufacturer l > 1% of Purchases = Non-Strategic Supplier Retailer In these cases, retailer will try to push manufacturer onto an e-market; manufacturer needs to find ways to keep relationship of the e-market. Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
B 2 B Commerce Will Continue to Go Through Multiple Channels US B 2 B Sales By Channel, 2002 (Total = $12. 6 Trillion) 0. 3% Catalog 1. 4% Direct Marketing 23% Sales force & in store 3. 2% Internet E-Markets 5. 8% Internet E-Markets 15. 5% EDI with VAN s 5. 6% EDI with Internet ETNs 1. 6% EDI Direct Via Web 3. 1% Web EDI 43% Sales force & in store influenced by Internet Giga Information Group Source: Giga Information Group © 2000 Giga Information Group, Inc. ® Figure 2 YOUR e-BUSINESS ADVISOR
Key Business Challenge: Managing Multiple E-Channels Store Sales Person Traditional Orders 2000 Orders 2004 Telephone Mail EDI-VAN Proprietary Electronic Leased Line Dial-Up Web EDI-ETN Internet Electronic Direct EDI Extranets E-Markets Figure 1® Giga Information Group © 2000 Giga Information Group, Inc. YOUR e-BUSINESS ADVISOR
Conclusions and Recommendations l l E-marketplaces will play an increasing role in B 2 B e-commerce. Industry-consortia-owned e-marketplaces will tend to prevail over new-entrant e-markets or private extranetbased e-markets – but not always. – Will move from payment transactions to collaboration – Will be run as non-profit co-ops with subscription revenues l l l But e-marketplaces will be one of many channels used in B 2 B e-commerce. Companies will need to have explicit e-channel management strategies — use right channel for right customer or supplier relationship. Companies will have multiple e-channels to integrate. Giga Information Group © 2000 Giga Information Group, Inc. ® YOUR e-BUSINESS ADVISOR
- Slides: 19