Scores of suppliers have been resistant to hopping on the electronic business-to-business bandwagon, fearing that they will be so commoditized or pressured by comparative pricing that they will fail to see much benefit from shelling out potentially big bucks to get there.
Microsoft aimed to address that problem earlier this month when it announced the availability of what it calls its Solution for Supplier Enablement. The software giant said that the package will make it easier, faster and cheaper for suppliers to connect to their customers' electronic procurement systems and marketplaces.
But whether packages such as the software/services combination Microsoft is offering will drive suppliers to link to marketplaces and procurement systems remains an open question.
"The challenging aspect with Microsoft will be the education of midtier and smaller companies as to what supplier enablement means to them," said Louis Columbus, an analyst at Boston-based AMR Research Inc. Many suppliers also ask, "What's in it for me?" he added. "It's difficult to explain to someone, if they don't feel any pain, that they need some medicine," he said.
The Microsoft software package is largely a collection of existing products, such as the Windows 2000 Server operating system, the SQL Server 2000 database, the BizTalk Server XML messaging and workflow engine, and Commerce Server, which provides personalization and transaction capabilities.
There's also a key new piece of software, called BizTalk Accelerator for Suppliers, that includes adapters that let suppliers connect to systems using the XML formats from Ariba Inc., Commerce One Inc., Clarus Corp. and others.
Additional functions enabled by the Microsoft software stack include the creation of a customized business-to-business Web site, automatic catalog transformation to various XML formats, and remote shopping, which lets buyers punch out from their procurement applications to a supplier's business-to-business site to make a purchase.
But Laurie Orlov, an analyst at Forrester Research Inc. in Cambridge, Mass., said she doubts that Microsoft's "collection of components and capabilities" will have any great impact on supplier adoption. Orlov said procurement vendors such as Ariba need to host the software "with a few more steps in the business process for suppliers and charge very little money for it in order to get the supplier adoption that really makes the procurement applications pay off in ROI."
Microsoft solutions manager Julia White said pricing for Solution for Supplier Enablement starts at US$24,000 for the base system for a small company, with consulting services typically tacking on an additional $50,000. A base system for a large enterprise can cost $420,000, with an extra $1 million for consulting services, White said.
Customers can employ consultants to do the work. Microsoft has partnered with several companies, including Accenture Ltd., Cap Gemini Ernst & Young and Compaq Global Services, a spokesman said. wBeta Users Back Microsoft's New B2B PackageSome small companies are starting to see the light, when it comes to business-to-business e-commerce including two beta users of Microsoft's Solution for Supplier Enablement.
Jeff Odom, president of printing products and services vendor TCS Corporate Services in Richardson, Texas, said any concerns he had about the costs of deploying the Microsoft package are being offset by his access to new markets.
Odom said a growing number of his Fortune 500 customers have been asking his firm to interface to the Ariba and Commerce One e-procurement products they have been installing. But he couldn't find a vendor to help for less than $1 million.
"That's just absolutely out of our budget," Odom said, noting that his firm has $15 million in annual revenue and a two-person IT staff.
TCS spent about $50,000 on the Microsoft software licenses and consulting services, which came from a Microsoft partner, Odom said. One of the benefits is that TCS can now publish its catalog, or a customized subset of it, in Ariba's CXML, Commerce One's CBL or any other format.
Odom said his company is already seeing a payoff. One large computer maker recently noticed that TCS had deployed an Ariba catalog and thus included the company in a reverse-auction bid. TCS ended up winning the bid for toner cartridges.
"Usually, you have to scratch and claw for business opportunities, and in this case, this one came to us specifically as a result of our capability to publish [Ariba's] CXML," Odom said.
Once the back office is connected to the output of the sell-side system, TCS expects to see a reduction in transaction costs from $27 per transaction to $6, Odom said. That should save the company $42,000 per month, based on its average of 2,000 transactions per month.
Kevin Govin, chief operating officer at MarkMaster Inc., a Tampa, Fla.-based manufacturer of custom rubber stamps with $7 million in annual sales, said he has been able to reduce his customer service staff from eight to six employees since deploying Microsoft's software package. Govin's company processes 4,000 to 6,000 orders per day, and he said 100 of those are now coming through the new system.
Govin said the Microsoft package was worth implementing because he can leverage it to connect to multiple sites and multiple market engines. "If you were doing it for one customer, [the cost] would be prohibitive," he said.
MarkMaster had eight Fortune 500 customers before installing the Microsoft system. By summer, it expects to have set up 50, Govin said.