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E-Commerce 2002: B2B Survivors Focus on the Enterprise

E-Commerce 2002: B2B Survivors Focus on the Enterprise

Whether through incumbency, well-aimed product and service strategies or sheer luck, many B2B technology companies have navigated themselves through the worst of the industry shakeout.

By Mark W. Vigoroso
01/02/02 5:11 PM PT

The demise of many individual electronic marketplaces in 2001 may have unfairly tarnished the reputation of the overall business-to-business (B2B) e-commerce sector.

While scores of online companies specializing in matching buyers with sellers have perished in recent months, throngs of B2B technology companies steered clear of the downswing and have survived, and the top companies stand to prosper.

"[E-marketplace providers] assumed that most purchasing is done based on price alone," Yankee Group senior analyst Jon Derome told the E-Commerce Times. "This is not the case in the business world. Thousands of factors are involved in purchasing decisions."

Whether through incumbency, well-aimed product and service strategies or sheer luck, many B2B technology companies have navigated themselves through the worst of the industry shakeout.

Bottom-Line Rules

Many of the B2B technology providers still standing are those that use software and services to facilitate critical business processes like channel partner communication and collaboration, analysts said.

With tough economic conditions strangling IT budgets, most businesses are looking to leverage their existing technology investments.

This has fostered a resurgent focus on the enterprise and on opportunities to integrate internal processes with external business partners.

Inside-Out

"We're seeing an expansion of enterprise resource planning (ERP) technology, rather than 'outside-in' forces like e-marketplaces," Jupiter Media Metrix analyst Jon Gibs told the E-Commerce Times. "So we have existing enterprise investments growing outwards towards partner relationships."

Some e-marketplaces may thrive, especially in commodity industries where price is paramount, suggested Derome. But they failed to take hold in many vertical niches because of weak value propositions.

Missing Links

Technology companies that are tackling the complexities of integrating disparate business systems not only have survived, but could prosper, analysts agree.

"We'll see more channel partner enablement solutions, rather than buyer-centric models," said Gibs.

"Original equipment manufacturers (OEMs) will work with distributors and retailers through channel relationships online, exchanging catalog information in real time," Gibs added.

Key companies in this integration arena include Tibco (Nasdaq: TIBX), WebMethods (Nasdaq: WEBM), and Vitria (Nasdaq: VITR).

"New technologies like Web services will reduce the complexity involved in machine-to-machine communication, and we'll move to a more federated commerce model," said Derome.

Special Services

Another characteristic of B2B survivors is the ability to offer a service component and not just software, said Gibs, citing e-sourcing software and service provider FreeMarkets as a prime example.

The Pittsburgh, Pennsylvania-based firm couples reverse auction software with extensive supplier evaluation and sourcing services.

Additonally, FreeMarkets delves into direct materials procurement, where online automation could create measurable long-term value, added Gibs.

Role-Playing

Clear product focus has ushered FreeMarkets and other B2B technology companies through these precarious times, analysts said.

Companies that have focused squarely on business processes such as inventory liquidation, which place the most burden on corporations, have endured, said Gibs.

"We will see fewer grandiose hosted solutions," said Gibs. "There are many disparate business processes, but it's questionable whether they should be dealt with by the same software."

Cutting to the Core

Consequently, broad-based supply chain management software vendors such as i2 (Nasdaq: ITWO), Manugistics (Nasdaq: MANU), SAP (NYSE: SAP), and Oracle (Nasdaq: ORCL) may have to fine-tune their offerings, suggested Gibs.

Indeed, New Economy figureheads Commerce One (Nasdaq: CMRC) and Ariba (Nasdaq: ARBA) have trimmed their core offerings in recent months, de-emphasizing e-marketplace infrastructure and refocusing on discrete procurement applications, noted Derome.

Heavyweight Champions

That said, heavy hitters like Oracle, SAP and IBM have relied on their broad customer bases during this downturn to outlast smaller competitors.

In the early days of B2B technology, many small companies introduced watered-down versions of a product, according to Gibs, only to have long-standing veterans swoop in months later with more solid offerings.

As Gibs put it, "Nobody gets fired for buying IBM."

Unfriendly Economy

What are today's B2B survivors facing in the months ahead? More uncertain times, said analysts.

"There's not a lot of capital available, even for companies with good ideas," warned Gibs.

Real-time collaboration and trading partner integration are indeed key opportunity areas, but "these are still risky categories, which won't experience significant growth until there are signs of an economic recovery," added Derome.


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