E-Shakeout

SAN MATEO (05/15/2000) - This year marks the passage from the first wave of I-commerce into a more sophisticated era, experts say. Companies are starting to build alliances, integrate services, and create online exchanges that go beyond a simple buy-sell model.

Now that we're beyond the phase where companies slap up a Web page just to get something online and dot-com start-ups and dedicated dot-com divisions are the order of the day, the increased competition will start weeding out the winners and losers.

How will this work? Take the independent-trading sector, for example: With new digital exchanges going up left and right, businesses are starting to feel the competitive pressure. Two crucial forces are at work now in the world of start-up exchanges -- and sometimes those forces work against each other, says Bob Parker, vice president for electronic commerce at AMR Research Inc., in Boston.

To be successful, exchanges need to prove that they're independent, so buyers and sellers trust that they are getting a fair deal.

"One thing that's important is neutrality. You can't favor any buyer or supplier," Parker says. But at the same time, exchanges need liquidity -- or volume -- to attract more business.

"They have to bring a critical mass of buyers and suppliers to the exchange so people have lots of choices,"Parker says.

That's a hard balance to keep. Say you run a business-to-business exchange for the plastics industry. To keep buyers coming, you need to lure some of the big resin suppliers to the exchange. But the big suppliers may start asking for a piece of your company, or a financial lure, which calls your neutrality into question. Under this market dynamic, Parker suspects only two to three exchanges will survive in each vertical enterprise.

But there are plenty of niche opportunities left to fill. One up-and-coming trend is a focus on exchanges that not only do transactions for goods, but provide services -- such as a connection to financial services -- to make those transactions more valuable.

Another trend is the "whole move toward what we call 'customer-facing applications,' " says Varda Lief, a senior analyst at Forrester Research, in Cambridge, Massachusetts. These applications put an emphasis on getting to know how a business-to-business customer or partner works.

"We call that a networked model of the world," Lief says.

So the future is shaping up to be about relationships: building them, keeping them, and forging them in a way that maintains certain critical business boundaries -- not particularly easy tasks for CTOs in a marketplace with constantly blurring boundaries.

Technologies to keep on your e-business radarAlong with privacy tools, digital cash, and security and directory technologies, CTOs are keeping a close watch on the following.

Wireless: "This is in the very early adopter stage, but the potential for high-end consumer and business use is almost unlimited," says David Holtzman, CTO at Network Solutions Inc.

Embedded chips in consumer goods: "As the price of 'smart chips' sinks under a penny, retailers will be able to collect more accurate information on consumer buying patterns by integrating these chips into the goods themselves. ... At the five-to eight-year point, more and more appliances will be able to interact with these networkable commodities ... to create 'smart homes,' " says Holtzman.

Caching: "Caching is going to be the No. 1 most important technology. We have to somehow evolve the database so that we can use them directly and not have to build all these caching layers on top of them to achieve performance, and make it easy to invalidate caches when required," says Andy Martin, CTO of Garden.com Inc..

Dynamic exchanges: "I believe that dynamic exchanges, and networks of vertical exchanges, will become the way to maximize value in the b-to-b space," says GoCargo's Jim Galley.

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