Next-Generation Exchanges
From pushing transactions to enabling real business
Despite the newness of both concept and technology, we're already up to the third generation of B2B trading exchanges. The first was the toe-in-the-water EDI replacement exchange, with little more to offer than an electronic pipeline to move orders for nonstrategic goods between partners. Generation two expanded to strategic supply issues, and started building out the extended supply chain. This was when MRO vendors Commerce One and Ariba started to augment their portfolios and partnerships, culminating in the SAP/Commerce One and Ariba/I2/IBM alliances of last year. So far so good.
But not good enough. Net markets and exchanges—particularly private exchanges—are rapidly coming of age, boosting demands for functionality. Fueling this is the realization that the ability to interact with a public or private exchange brings with it the requirement for what amounts to a parallel IT infrastructure dedicated to supporting this new collaborative model. And that parallel structure has a singularly onerous demand: enable as many strategic business processes as possible in an automated fashion. In other words, replace all the faxes, phone calls, meetings, FedEx packages, e-mails—and the processes they support—with systems that accomplish the same tasks, but at greater speed, volume, accuracy, and efficiency, using XML and other technologies.
The shift is not unlike the ERP revolution. While ostensibly about manufacturing, it became clear that the integrated view of the enterprise that modern ERP systems allowed really meant that business processes would need to be automated and engineered into software as much as possible. It became relatively easy to see where the next ERP-like innovation was going to take place: Just walk around a big company and see where nondigital processes outnumbered digital processes, and then create enterprise software to automate those tasks. Thus ERP spawned sales force automation (SFA), customer relationship management (CRM), enterprise marketing automation, professional services automation, etc., etc.
Linking CRM to ERP
The same thing has to happen in the newly automated exchanges. They need to take what had been a set of peer-to-peer paper processes and turn them into a set of multicast, many-to-many electronic processes. This happens in two steps: e-business enabling the internal enterprise, and then building out the external B2B collaborative infrastructure.
The requirement to e-business enable the internal IT environment has boosted the prospects for some application integration vendors. Primary among them is WebMethods, which acquired Active Software last year and is in the process of building the railroad for B2B collaboration at some 500 customer sites. Tibco, BEA, and SeeBeyond are also catching this wave. These companies are poised to provide an essential requirement for B2B enablement: connecting the back office to the front office, or, more succinctly, CRM to ERP.
The fact that there is so little CRM-to-ERP connectivity is one of the dirty little secrets of an industry that has been pushing integrated solutions. CRM has been mostly SFA, and, if you know salespeople, it's no surprise that they've resisted being connected to the back office. But now the real CRM, what I call contact relationship management, is emerging as an essential element of the B2B infrastructure. If your business now relies on processing automatic orders and fulfilling demand on the Web, you had better be tracking that demand closely and providing a full-blown set of services to make sure your customers are getting what they want, and that your sales and marketing efforts are focused in the right direction. To do otherwise is to remain noncompetitive in the face of more automated, and therefore more effective, competitors.
Right alongside a contact relationship management solution is a bona fide, integrated contact center. We used to refer to these as call centers, until it became obvious that Web, e-mail, chat, and phone needed to be integrated in a single customer support function. In fact, the word "customer" becomes somewhat atavistic in this light. In B2B, everyone is a customer: the partner, the supplier, the distributor, the logistics company—as well as the end user and buyer of finished goods. Thus, the prospects of CRM vendors that can genuinely sell and deliver this multitouch-point service—companies from Siebel and Blue Martini to PeopleSoft's Vantive to Oracle, SAP, and even U.S. market newcomer Altitude—are likely to grow as next-generation exchanges grow.
Supporting the Collaborative Environment
But the notion that everyone is a customer in B2B exchanges means that CRM isn't enough. This demands new services beyond just e-business enabling the enterprise. To fulfill their promise, exchanges need to provide support for a highly collaborative environment. That adds such requirements as partner relationship management, sales channel management, and collaborative product development to the requirements for next-generation exchanges. This puts the spotlight on companies like start-up Trigo and Intelic, both of which have partner relationship management solutions, as well as Oracle's Product Development Exchange, which Oracle is pushing as a next-generation collaborative service running in its Exchange environment.
Along with partner, channel, and collaborative development support comes the requirement to manage the contractual relations within the exchange environment—which includes not just contract development and maintenance but the monitoring of contract terms and conditions as trade is conducted. This represents one of the most significant opportunities in B2B exchange technology. The potential has attracted a number of companies, from SAP and Oracle—both of which will be pushing advanced contract management functions this year—to more "pure-play" contract management vendors, such as DiCarta, Provato, and Webango.
Another key function that needs to be a major part of next-generation exchanges is extended supply chain management (SCM). Supply chain software from the likes of i2, Manugistics, Oracle, SAP, and PeopleSoft has played a strong role inside the firewall. But the requirement for available-to-promise and build-to-order e-business models means that SCM needs to extend beyond the firewall to suppliers and other partners. The trading exchange becomes the natural platform for this new functionality.
What's interesting about extended SCM is that the midmarket companies that make up the bulk of the prospective exchange partners have much lower technology requirements and even lower budgets than the top-tier manufacturers and other channel masters that have traditionally bought software from the supply chain leaders. This requirement has spurred the development of a number of alternative solutions, particularly for the midmarket manufacturers that are needed in order to build up a critical mass of transactions in next-generation exchanges. One of the more interesting of these companies is start-up eB2x, which is promoting low-cost, low-technology supply chain connectivity for midmarket companies that don't have ERP or MRP systems. Also getting into the game later this year will be Microsoft which, in addition to buying midmarket accounting and ERP vendor Great Plains, is promoting a supplier enablement solution for extended supply chains based on its Biztalk and Commerce Server engines.
Real-Time Analytics
My final category for key next-generation functionality is analytics. In the first two generations of exchange technology, we were just happy to move lots of transactions between partners. Next-generation exchanges need lots of smart transactions, based on advanced, real-time analytics. Partners need to know the best price, the best partner, the best part, the best delivery channel, the best selling and marketing strategy, the best answer to a customer query—all in real time, on the desktop, and in an easily understood format.
Exchange business takes place in real time. It doesn't matter whether it's a PC buyer who wants to know exactly when a site can deliver a custom-configured PC, or Cisco wondering which partner could overnight a key hardware component.
The requirement to provide real-time supply chain visibility and real-time answers becomes one of the most essential success factors in next-generation exchanges. This pits some newcomers—like InfoRay and See Commerce—against the data warehouse-based analytics offerings from ERP vendors PeopleSoft, Oracle, and SAP, as well as "old-guard" analytics vendors like Business Objects.
A true business process revolution is under way, fueled by the growth of private and public exchanges. How partners interact and collaborate represents an opportunity in the software industry that will have its greatest expression as part of next-generation exchanges. It's going to make the ERP and business process reengineering revolutions of the early '90s look tame by comparison.
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