Group 2
B2B Exchanges
Timothy Brasher
Tamira D. Meier
Stephen P. Nicholas
Nov. 2003
B2B Exchange
Worldwide: B2B market for services projected to
grow from $403 billion (2000) to between $2.4 to
$7.29 trillion (2004)
B2B e-commerce represents 7% of forecasted
$105 trillion of total global sales transactions
All businesses will eventually buy on, sell on,
host on or be marginalized by an exchange
www.neonultra.com/b2b_b2c_b2g.htm
B2B Exchange
Forecasted B2B Revenues Worldwide
www.emarketer.com
What is a B2B Exchange?
 An e-marketplace where buyers and sellers exchange
goods and services
 Purchase mechanisms – one of the following:
*
*
*
*
Auction
Aggregate Auction
RFQ/RFP
Value-Added Services
* Reverse Auction
* Catalogs
* Matching buyers & Sellers
 Examples of services:
* Portal
* Application Rental
* Workflow Management
 B2B exchanges produce revenue via membership and
subscription fees, transaction fees or some combination
http://www.workz.com/cgibin/gt/tpl_page.html,template=1&content=1410&nav1=1&
B2B Exchange
CONTRIBUTION
COMMODITY
DIFFERENTIATOR
CRITICAL
Critical Commodities
*** Critical
Differentiators ***
USEFUL
Useful Commodities
Eliminate/Migrate
A B2B exchange is a cooperative among businesses
where each corporation shares resources of critical
commodities Critical commodities provide incentive to:
collaborate
reduce costs
share gains
B2B Exchange
Potential competitors reduce costs through
shared industry ventures (critical commodities)
Supply Chain Management:




Web based trade exchange for procurement
Component suppliers bid via exchange
Preferred supplier vs. open bidding?
Just in Time (JIT) inventory
Fixed networks vs. virtual networks
Lacity, Mary, and Willcocks, Leslie, Global Information
Technology Outsourcing: Search For Business Advantage,
John
B2B Exchange
Value-Added Benefits






Economies of scale - cut IT development and
operating costs
Scalable common industry interface
Cut deployment costs
View real-time data
Increased visibility across supply chain
Security/data integrity (128 bit encryption)
www.covisint.com/cgi-bin
Three Categories Defined
Consortium

One or more business organizations pool leading
vendors or buyers in a particular industry
Public Exchanges

Run by third party, open to all companies that meet
standards
Private Marketplaces

Run by a single company and it’s key suppliers
http://search.epnet.com/direct.asp?an=5271260&db=afh"
>The Dynamics of B2B E-Commerce.</
Three Categories of B2B
Consortium


Global Food Exchange
Covisint
Public Exchanges

Commerce One
Private Exchanges


Wal-Mart and Dell
FuelQuest, Inc.
http://www.workz.com/cgibin/gt/tpl_page.html,template=1&content=1410&nav1=1&
Horizontal Exchange
Horizontal Portal Exchanges

Provides specializes services across several
industries.
Example: SteelNet.com



Salesinfo
Markets
Supplies
Supplied to customers across multiple domains
neonultra.com/b2b_b2c_b2g.htm
Vertical Exchange
Vertical Portal Exchanges

Provides a set of services across a single
industry
Example: VerticalNet.com




Technology
Communication
Environmental
Healthcare/Science
Biosearch.com: biotechnology/life science
Drugdiscoveryonline.com: pharmaceutical industry
neonultra.com/b2b_b2c_b2g.htm
Case Studies
Covisint

Automotive Industry
FuelQuest, Inc.

Petroleum Industry
FreeMarkets.com

Industrial Goods & Services
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
Procurement
Covisint 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 Quality
Customer 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 Quality
•
•
•
•
•
•
Supplier 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 Portal
128 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.covisint.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 eProcurement, 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
Technology
 AIMS
 Microsoft
 Accenture
 Cisco
 DM2 Software,
 IBM
Inc.
 Sun
Microsystems
 Oracle
Nov. 2003
www.fuelquest.com
Alliances
Marketing
• Accenture
• FuelAccess
• b2b Solutions
Nov. 2003
Industry
• Meridian Associates, Inc.
• FTA
• Petroleum Marketers
Association (PMAA)
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
www.fuelquest.com
FreeMarket Case Study
• Background
• Services
• Case Study Conclusion
Nov. 2003
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
1=http://www.freemarkets.com/en/freemarkets/default.
asp
FreeMarkets’ Background
• Company founded 1995
• IPO December 10, 1999 (NASDAQ
FMKT)
• IPO Price per share $48
http://www.freemarkets.com/en/freemarkets/investor_r
elations/main.asp
54
FreeMarket’s Background
• Customers:
http://www.freemarkets.com/en/freemarkets/literature.a
sp
55
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
http://www.freemarkets.com/en/freemarkets/default.as
p
56
FreeMarket’s Services
• Integrated Solutions
• Software Solutions
• Global Services
Nov. 2003
Integrated Solutions
•
•
•
•
FullSource
Supplier Implementation Solution
Spend Visibility Solution
Sourcing Empowerment Package
Nov. 2003
Integrated Solutions
• FullSource
– getting faster results
– minimizing supply risks
– building capabilities
– tackling tough spend
• Supplier Implementation Solution
• Spend Visibility Solution
• Sourcing Empowerment Package
http://www.freemarkets.com/en/solutions/integrated/full
source/features.asp
59
Integrated Solutions
• FullSource
• Supplier Implementation Solution
– Skilled, short term implementation resources
– Project Management
– Document Collaboration
– Repeatable Process Library
• Spend Visibility Solution
• Sourcing Empowerment Package
Nov. 2003
http://www.freemarkets.com/en/solutions/integrated/su
pplier_imp/features.asp
60
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
http://www.freemarkets.com/en/solutions/integrated/sp
end_vis/features.asp
61
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™
Nov. 2003
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/es/d
efault.asp
64
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
http://www.freemarkets.com/en/solutions/software/QS/
default.asp
65
Global Solutions
•
•
•
•
Application Services
GSM Services
Education Services
Consulting Services
Nov. 2003
Global Solutions
• Application Services
– Market Operations Services
– FreeMarkets Supplier Training
• GSM Services
• Education Services
• Consulting Services
http://www.freemarkets.com/en/solutions/services/appli
cation/default.asp
67
Global Solutions
• Application Services
• GSM Services
– FreeMarkets FullSource
– Sourcing Support Desk
• Education Services
• Consulting Services
http://www.freemarkets.com/en/solutions/services/gsm
/Default.asp
68
Global Solutions
• Application Services
• GSM Services
• Education Services
– Sourcing with Online Markets
– FreeMarkets QS Training
• Consulting Services
http://www.freemarkets.com/en/solutions/services/ges/
default.asp
69
Global Solutions
•
•
•
•
Application Services
GSM Services
Education Services
Consulting Services
– Organizational Transformation
– Outsourcing
– Low-Cost Country Sourcing
http://www.freemarkets.com/en/solutions/services/cons
ulting/default.asp
70
Is it a Success?
http://quotes.nasdaq.com/quote.dll
71
Is it a Success?
2002
2001
2000
1999
Annual Sales ($ mil.)
170.4 147.6
91.3
20.9
Annual 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.
http://www.hoovers.com/freemarkets/--ID__59661-/free-co-fin-factsheet.xhtml *
Case Study Conclusion
• Freemarkets has landed large, globallyreaching 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
Nov. 2003
Conclusion
Hurdles for B2B Exchanges

Financial Concerns - Viability
Pricing


Transactions fees/subscriber fees
Industry specific concerns
?Anti-Trust/FTC Regulations (Covisint)
Competitors fears (FuelQuest, Covisint)
Conclusion
Hurdles for B2B Exchanges continued:

Maintain Vision
Role of CIO/Management
Evolve to meet demands

Consolidation – Dominant players
Vs.
Multiple/Small Private Exchanges
Conclusion
Future vision

By streamlining the business process,
providing hosted applications, and offering
value-added services such as supply-chain
management, some exchanges are
flourishing in tough times. These successful
exchanges have found their niche within a
specific industry and have emerged as
members of the winners’ circle.
http://archive.infoworld.com/articles/hn/x
ml/01/06/11/010611hnexchange.xml