The PaperExchange Model

SAN MATEO (06/05/2000) - Although the pulp and paper industry may sound unglamorous to some, every time you pick up a newspaper or put paper napkins on the picnic table, you are contributing to an industry that generates $500 billion in sales worldwide.

PaperExchange.com Inc., growing rapidly since its inception 2 years ago, provides a digital exchange for participants in the pulp and paper industry to do business with one another more efficiently.

PaperExchange's CTO, Carl Katzeff, sat down with InfoWorld Executive Producer/New Media Katherine Bull to talk about the company's digital exchange philosophy.

InfoWorld: Tell me a bit about your business.

Katzeff: We provide a digital exchange for paper-industry users and consumers.

The paper industry has a very large population of producers and consumers; it's a worldwide industry and it's fragmented in the way that people can buy and consume the paper they want. PaperExchange is providing a marketplace for people to perform the procurement for buying and selling paper.

InfoWorld: What is making digital exchanges important?

Katzeff: Digital exchanges are becoming an integral part of business models because people are realizing that they can sell the same amount of goods at less cost by squeezing out certain costs. Five or six years ago, people had to reach out to other organizations by creating private WANs, which is a very cost-consuming endeavor. The only [ones] who did it were large organizations, and typically they did it internally. So for smaller [businesses] to do that, like graphic houses and paper mills, it was very difficult for them to create a network to link suppliers. The Internet has really changed that. Now we have VPNs on top of the Internet and telecom vendors having private networks on top of that, and that's what the play is all about -- it's the network. People have spent billions of dollars creating the Internet and having that there itself isn't important. Taking that enabling technology and creating different types of businesses like exchanges is what's important.

InfoWorld: What technologies are important to digital exchanges?

Katzeff: VPNs for sure, but the question is how digital exchanges are going to be able to use this public bandwidth to trust business transactions over the network. We are relying on IPsec to help us secure our transactions, and we use tools that enable us to do the integration and be able to communicate business partner to business partner in a secure manner. People are going to have to adopt standards; and not just XML, but what the set of transactions are going to look like. We're working with organizations to put forth standards so that business partners can talk to each other digitally. Directories are important so that people can look up products through exchanges [by using] standards.

InfoWorld: What is the future of digital exchanges?

Katzeff: I think exchanges like ours [are] marketplaces. It has to be more than just an exchange platform but needs to offer capabilities in and around the marketplace that will offer a more complete capability. It will manifest itself in how we connect to our partners and customers. We offer logistical services to our customers, and we have developmental partnerships with other people where we will help with paper acquisition. You can't think too narrowly, and you have to see the total business flow and opportunity [in an industry]. We have to make sure that the marketplace conveys that total, complete package.

Digital exchanges are changing the business paradigm, and people get those services faster and cheaper today.

Carl Katzeff, PaperExchange

Age: 47

Title: CTO

Biggest successes: Contributing to the team's effort to bring the company from infancy to where it is today; delivering the company's 3.0 softwareKey challenges: Staying in tune with what customers want; helping manage growth of the companyPersonal note: Katzeff enjoys spending time with his 7-year-old son, and performing community-based volunteer work

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