B2B: Bonanza or Bust?: Page 2

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Problems, Solutions, and Costs

For now, the exchanges have their hands full getting even the most basic offerings up and running. Most of the exchanges have been plagued by problems, including incomplete transactions, antitrust worries, and less than stellar traffic.

Alphabet Soup
Some of the important B2B exchange technologies:

eXtensible Markup Language (XML): The emerging standard for Web documents--which allows designers to create their own customized tags--enables the definition, transmission, validation, and interpretation of data between applications and organizations. Electronic business XML (ebXML) is an effort to develop an electronic commerce standard registry, transport mechanism, and business process description.

RosettaNet: A group formed by American Express Co., Microsoft Corp., IBM Corp., and others, to use XML to standardize labels for elements like product descriptions, part numbers, pricing data, and inventory status.

Universal Description, Discovery, and Integration (UDDI): Announced in September 2000 by IBM, Microsoft, Ariba Inc., and others, UDDI is an XML-based standard now under development to create a directory for online businesses to register themselves and their services.

In the short term, say the next three to four years, private exchanges will be the predominant way for partners to trade with one another, according to AMR's Prouty, as the public exchanges work out all the kinks in their technology and services.

Some are working to contain and complete transactions at their sites. Today, most transactions are settled offline, between the buyer and supplier, and sometimes are never completed for various reasons. "Incomplete transactions are a big problem," says Frank Florence, vice president and general manager, B2B business unit at Interwoven Inc., a content management software maker in Sunnyvale, Calif. "There are buyer identity problems, contract negotiations falling apart. Only 4% to 5% of Net marketplaces are doing a fully integrated transaction, tied into the back end and deleting from inventory."

Part of that problem is financial, and many exchanges are making an effort to offer broader range of credit services in their second generation. GE's Express Marketplace, for example, plans to offer what it calls settlement services, or the ability to generate electronic invoices and to tie that into GE Capital, which will finance and pay the invoice. The service is currently in beta testing.

But the other part--integrating suppliers' and buyers' in-house enterprise resource planning (ERP) systems, supply chain software, or simple ledgers into the exchange--is a gnarly technical issue for the marketplaces. It also often requires an up-front investment, and a leap of faith, for the participant.

"Companies can connect tomorrow via a browser, but the real value is integrating the back end," says Mike Johnson, CIO at Enporion Inc., an Allentown, Penn., exchange for the energy industry founded by several utilities. That includes publishing their catalogs, which may entail a lot of work if those catalogs are paper based. "Some of them don't appreciate all that is involved," Johnson says.

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