Emerging Trends

It is predicted that within the next three years the merging and acquisition of e-marketplaces will continue, and we will also witness further failures. It is also envisaged that not more than a couple of e-marketplaces will remain in the world.

However, the respondent foresees other players entering into the e-marketplace business, which could involve large corporations from other industries. For example IBM, Microsoft, or other large software providers, as well as groups like General Electric that have mega trading companies, trading platforms, and electronic trading platforms, might become very interested in the services e-marketplaces provide. Although the respondent does not think any of these

“giants” are interested in taking over all B2B e-marketplaces’ services, he predicts IBM will move forward in that direction within the next few years.

Referring to the fact that suppliers are becoming more and more global, the respondent foresees that new services might be developed around aggregated purchasing. A couple of initiatives already exist in France and Germany, where companies have decided to aggregate their purchasing and buy together instead of individually, thus saving money. The respondent’s experience is that the established phenomenon of aggregated purchasing has made it much easier to approach large suppliers, such as Dell and HP, and try to reduce the number of contracts to a minimum (if possible, only one).

Besides continued consolidation of B2B e-marketplaces and the development of new services, the respondent emphasizes that the prevailing high cost of technology is an issue that must be dealt with. If the cost of technology does not decrease in the future, achieving e-marketplace success will be difficult: “We cannot stay in the market for long with such expensive technology. We need to find a way to lower those costs.” One way to lower the cost is to outsource some of the development of technology to low-cost countries. According to the

respondent, the company has to consider outsourcing of the content building, for example, since that is a very standardized task and, from an added value perspective, it does not matter in what country the task is carried out.

Although the suppliers of the technology are aware of the fact the whole industry continues to merge, and there will be only a few players left within a couple of years, they do not seem to be prepared to lower their prices. According to the respondent, the reason is that the whole e-marketplace industry is a small customer. It can be concluded the e-marketplace industry, as a whole, is not big enough to force technology providers to change their pricing structure.

5.2.8 Summary

In this section a short summary of the case is provided.

The company could be described as a horizontal e-marketplace, which mainly targets large (with more then €200 million in the purchasing budget) companies in Europe that have subsidiaries in several countries and decentralized organizations.

The major types of products traded through the e-marketplace are indirect goods and services. Private investors and a number of large companies that also participate as buyers on the e-marketplace own the firm. However, the respondent states the company balances its focus with respect to buyers and suppliers and, thus, can be considered neutral in its governance. The company’s strategic position with respect to functionality currently covers the source-to-pay process.

The e-marketplace’s functionality involves sourcing capabilities, e-procurement, and auctions, and facilitates the customers’ management of demand, sourcing, and contracts, as well as their matching and payment of invoices. The main content on the e-marketplace is related to the commerce of non-production goods and services, and the main collaborative tool is a portal that the company has developed to facilitate content exchange between buyers and suppliers. As for technology, the company’s trading platform is based on SAP and POET technologies and its communication platform is supported by WebMethod technology. The respondent characterizes utilized technological systems as flexible, scalable, and secure.

In summary, the following factors can be considered as critical for the e-marketplace’s success:

o A high degree of standardization

o User adoption

o Customer care (i.e., ability to meet customers’ needs and expectations)

o An entrepreneurial mindset (i.e., ability to quickly adapt to market change, and to keep control of costs)

o A neutral governance (i.e., not biased toward buy-side or supply-side)

o Technological expertise

Concerning factors that cause the failure of e-marketplaces, the following can be summarized:

o Inability to deliver expectations that are promised

o Lack of sufficient funds (capital)

o High consultancy costs

o Inability to comply with fast pace of market change

o Inability to keep the e-marketplace neutral and prevented from becoming an internal service firm for shareholders

In short, the following issues are major challenges the management must deal with:

o Find enough capital to build up the business

o Manage the firm in a rapidly changing business environment

o Develop new services

o Be highly customer-oriented

o Find an appropriate pricing model for suppliers

Summarizing the various components of the company’s business model (i.e., Mission, Value proposition, Resources, Key activities, and Cost and revenue model) shows that:

o A successful mission should “ provide productivity increases and therefore savings to both buyers and suppliers through collaborative tools.”

o Value proposition: Services provided by the firm particularly do not differ from what others are offering. Besides offering its customers three main platform functions (i.e., e-procurement system, exchange hub, and a content and catalogue hub), Company A offers value-added services such as content management, back-end connection, functional customization, consulting, technical support, and training. The company’s offerings are not regarded as the main reason for success by the respondent, who states

that services provided by Company A do not differ particularly from what many other companies offer.

o Resources: The entrepreneurial mindset in the management of the firm is considered the main resource and a major reason for success.

o Key activities: Content management activities constitute a major competitive advantage for the firm.

o Cost and revenue model: The company mainly charges fees based on transactions, and mixes entrance fee and transaction fee with a fee for professional services. Both buyers and suppliers are charged, but the suppliers’ fees are lower.

Regarding environmental impact, the following factors are considered the most influential:

o The degree of compliance with frame contracts within the buyer’s organization will affect the pace of progress of the project’s progress

o Increased globalization has increased the need for tools that enable

collaboration and information exchange within and between organizations.

Thus, Company A offers such information and collaboration tools

o Legal pressure to provide more transparency in conducting business

o Cost of technology

Concerning the future, the following trends can be seen:

o Mergers and acquisitions of e-marketplaces will continue within the next three years

o Mega firms from other industries (e.g., IBM, Microsoft) might move into the marketplace business and challenge already established

e-marketplaces

o New services concerning aggregated purchasing might come up, due to increased globalization

o The cost of technology has to be reduced