eMarketplaces: Limits and Access
idc.com
November 16, 2000
eMarketplaces: Limits and Access
Despite a continuing flurry of announcements of new emarketplaces, there are limits to how many can successfully exist. The number of true emarketplaces will be in the hundreds rather than in the thousands, according to IDC Senior Analyst Leo Lipis.
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Figure 1 – Worldwide Value of B2B eCommerce Through eMarketplaces, 1999–2004
IDC defines an emarketplace as an Internet-based broker of goods or services within a community of many buyers and many sellers.
Many of the solutions announced are not real emarketplaces, and of those that are, many "will not be built; many of those built will not survive; and many of those that survive will consolidate into ‘super-emarketplaces,’" according to The Opportunity Around eMarketplaces: A Contrarian View and Its Implications (IDC #22721, July 2000).
For example, IDC considers the Covisint endeavor an eprocurement site rather than an emarketplace because it has only a few buyers and the trading community structure is designed to reduce the purchasing costs of the buyers.
Liquidity
To survive, emarketplaces need liquidity that results from providing benefits to both buyers and sellers as well as a community that is of value to participants.
Facilitating connectivity between participants and emarketplaces benefits both the spokes and the hubs. The emarketplaces, or hubs, need multiple active participants that conduct various aspects of business via the emarketplace.
Similarly, participants may need to join multiple emarketplaces, given the current segmented state of affairs with more than 1,000 emarketplaces.
Access
Many efforts are underway to create access to emarketplaces. These include:
Offering translations from electronic data interchange (EDI) and other formats to XML
Proposing new "standards" such as Transaction Authority Markup Language (XAML)
Providing interconnects for specific back-end systems
Another effort, the Universal Description, Discovery and Integration (UDDI) specification, is intended to create a framework to enable businesses to "discover each other, define how they interact over the Internet and share information in a global registry."
Commercescout claims to offer the ability to procure items across multiple marketplaces with a single click. Whatever the mechanism, buyers and sellers need to easily access each other.
Despite these efforts to facilitate integration, there will be plenty of revenue flowing to firms providing services for emarketplace participation.
IDC’s preliminary models forecast emarketplace services spending will increase from $503 million in 1999 to $10.1 billion in 2004, for a robust compound annual growth rate of 82%.
Value of Transactions
The value of business-to-business (B2B) ecommerce transactions that flow through emarketplaces will rise to $1.2 trillion by 2004, IDC projects (see Figure 1).
Because emarketplaces will be a major form of B2B ecommerce, companies of all sizes will have to develop the capability to link to them.
Points of Note
Companies might want to keep the following criteria in mind when making decisions concerning emarketplaces. They should look for an emarketplace founder that:
Has deep vertical and process expertise so that it can build communities and attract customers.
Is quick to market, because there’s only room for a limited number of players.
Can rapidly replicate success. The survivors will be the ones that move beyond vertical expertise to operational efficiency to create emarketplaces in new industries and geography.
– Molly Upton
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