The real truth about B-to-B e-commerce

Business-to-business e-commerce and e-marketplaces may be hot areas for Fortune 1,000 companies to explore these days, but there are a raft of challenges that IT leaders need to work through in making these partnerships work. So said a panel of CIOs who spoke about the "naked" truth of B-to-B e-commerce at Computerworld's Premier 100 IT Leadership Conference yesterday.

For example, much of the emerging technology that's being used to support digital relationships between business partners and customers "is unstable," said Bruce Carver, vice president of information management and technology at The Reynolds & Reynolds Co., a Dayton, Ohio-based information technology provider to the automotive industry. As such, Carver said, "if you look under the covers at the technology you're using, what's under the covers is (often) not something you want to sleep with."

There are business challenges, too. Creating electronic marketplaces can require working through a decades-old mentality of fending off bitter rivals and instead working with them to achieve common objectives, such as generating the kind of liquidity needed to make an e-market succeed.

"When we looked at (business-to consumer e-commerce), there wasn't much interest by senior management to sell competitive products on our site," said Robert Schwartz, vice president and CIO at Matsushita Electric Corporation of America (Panasonic). But in the electronics industry, noted Schwartz, "there's a lot of cross-selling. Sometimes we're competitors, and sometimes we're suppliers to each other. That's really where the industry has moved to, to 'co-opetition.' " CIOs have also quickly discovered that in e-marketplaces, "neutrality is the key" to gaining acceptance by suppliers and customers, said John Keast, CIO and chief technology officer at NetworkOil, a Houston-based global Internet exchange for oil services and equipment.

Kathy Brittain-White learned that lesson the hard way. Brittain-White, who is CIO at $26 billion Cardinal Health, told fellow IT leaders at the conference how her company tried - but failed - to convince competitors such as McKesson, analysts and customers that could act as a neutral site for buying and selling health care products. Instead, Cardinal is now in discussions about creating an exchange that would be run by a neutral third party.

Then there are the political challenges that CIOs are facing within their own organisations to get senior management and business unit leaders to embrace e-commerce and/or e-marketplace concepts. Said Carver, "I sit in these senior management meetings with sales ... and they're not embracing us. They (now) have to go out and sell" products, as opposed to relying on repeat business to drive their sales volumes, he added.

Schwartz concurred. "That old role of a salesperson visiting an account doesn't really apply anymore." To help deal with these changes, Panasonic is trying to "reshape" its sales organisation into more of a marketing group, said Schwartz, who called this a "huge" challenge for all organisations that are trying to adapt to the new economy model.

Historical return-on-investment criteria also don't apply to e-commerce funding. "If you're a company waiting for ROI on e-commerce, that's a very difficult thing," said Brittain-White. Instead, she said, funding e-commerce initiatives should be approached as a research and development investment because the anticipated returns "are really a leap of faith."

Peter Burrows, CTO at Reebok International in Stoughton, Massachusetts, said manufacturers such as his company "have to decide whether to partner with an e-tailer or a brick-and-mortar retailer" or spend millions of dollars to create an online shopping site "and compete with your (distribution) customers."

"The question is, Do you lead or follow (in e-commerce)?" said Schwartz.

The CIO panelists also had a few horror stories to tell. Burrows, for example, said he's "never met such aggressive salespeople (at dot-com companies and technology vendors) in my life. They'll say, 'I was just talking with your CEO a few minutes ago.' Well, I know our CEO, and you were not just talking to him," he jibed.

Still, the panelists all seemed to agree that the speed with which companies need to work in the Internet economy is forcing implementers of technology to partner even more closely with their technology vendors. Keast, for example, shared a tale of how eight days before the launch of NetworkOil's auction site, the group was unable to load the data about the lots of equipment that were going on the block.

"Man, the sky was looking black," he said.

Fortunately for his group, one of its key technology partners, Ariba, "really stepped forward" by immediately sending its engineers to Houston to work on the problem and resolve it quickly.

Said Keast, "When you're working in Internet time, you have to draw upon all the resources you can."

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