Shortchange from Trading Exchanges?

SAN MATEO (05/08/2000) - The hundreds of industry trading exchanges mushrooming on the Internet are riding the business-to-business wave as well as anybody.

The promised vision is compelling: Connect to a virtually unlimited number of business partners, get the best prices, and streamline your internal procurement processes simply by getting on board. But now, several months into exchange euphoria, companies need to take a long, hard look at existing online trading exchanges and weigh their role in an overall e-business strategy.

The first wave of these exchanges, or e-markets, was like throwing a party on a Saturday night and hoping to get more guests than the neighbor upstairs.

Start-ups focused on vertical industries and lined up the "heavies" in that industry to garner a critical mass of buying and selling volume, or liquidity.

But, exchanges are under pressure to prove their worth with value-added services, from financing to business intelligence.

Fundamentally, businesses need a lot more than a transaction broker to procure goods and services. Automating the business processes front-to-end requires integration of back-end fulfillment, ERP (enterprise resource management), CRM (customer relationship management), and supply-chain execution applications -- tricky stuff with which even established trading partners struggle.

But quickly linking from one network of partners to another without onerous integration work is essential for companies to gain broader market access. And the fact that vendors are proposing numerous variants of XML for data interchange is not making this process any easier.

Companies that are the big gorillas in their industry may decide to favor their own trading networks over these third-party exchanges. Indeed, large companies could be very cool about giving up valuable buying data to an outsider that may also be in the position to "own" the customer relationship.

Are exchanges, or e-markets, part of your business-to-business strategy?

Write to me at martin_lamonica@infoworld.com.

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