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November 1-15, 2000 MASTER FILE |
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Politics
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B-TO-B E-COMMERCE High Stakes At last, support might graduate from being a mere lip service. As businesses hop on to the Internet bandwagon and launch new sales, marketing and service support initiatives-they are opening a new channel of 24x7 interaction with their customers. For IS users in India, who had always been deprived of adequate service and maintenance, the concept of customer relationship management (CRM) comes as manna and has, but naturally, turned into the most popular buzzword. By K.Jayadev
"When we talk about fashion, we mean garments. But fashions change faster in the software industry," Larry Ellison, Oracle Corp.'s chairman and CEO quipped, when Computers Today asked him about the ongoing dotcom debacle. "Mainframes go out, high-end servers come in; client/server becomes passe, CRM dominates; B-to-C is out of fashion now, B-to-B is in. But none of them are making money. It's just a fad." In the IT industry, jargoning is trendy. Despite all the buzz and good wishes, we still don't know a lot about what makes B-to-B (business-to-business E-commerce) click (and what doesn't). What are the important ingredients in achieving critical mass? What makes one industry suitable for an E-marketplace and another not? Will auctions, exchanges or catalogues make the most sense-the three most common forms of B-to-B E-commerce? When does it make sense to establish horizontal marketplaces? There is a growing realisation that B-to-B will take years to mature, and that the rate of adoption-even if companies deliver a huge value equation improvement-will be gradual because it requires systems and individuals to act in fundamentally new ways. The Differentials
In the backdrop of a networked global market, where price comparisons are just a click away, what is left to distinguish one offering from another? Perhaps that is the next frontier of B-to-B: enabling technologies to incorporate more sophisticated back-end integration systems, financing options and logistical support. To put things in perspective: Taking Forrester Research's estimates, B-to-B E-commerce will amount to $2.7 trillion by 2004. The Gartner Group is even more bullish, projecting $3.9 trillion by 2003, while Merrill Lynch and International Data Corp. are conservative at $2.5 trillion and $1.4 trillion, respectively, for 2003. For India, NASSCOM puts the value of online B-to-B transactions at Rs 400 crore in 1999-00 of the total E-commerce of Rs 450 crore, and projects to reach Rs 42,000 crore by 2002-03. Goldman Sachs projects around Rs 7,000 crore of B-to-B E-commerce in India by 2003. Pricewaterhouse Coopers, on its part, predicts the figure for the year 2001-02 to be around Rs 13,200 crore of a total of Rs 15,000 crore worth E-business transactions. E.N. Venkat, director-in-charge of IPFonline Ltd, quoting a survey by the Indian Market Research Bureau (IMRB), says the market potential for B-to-B E-commerce in India is projected to be Rs 50,000 crore by the year 2001. But how much of B-to-B E-commerce is really happening in India? Says Venkat: "It is hard to quantify in terms of real numbers with no established data available in specific reference to the Indian context. But with so much interest in the segment, there is a possibility of this business assuming a huge proportion in the near future." So, are all these figures just on the paper? No, say industry watchers. "The market is not evident for the simple fact that these are not directly effecting the end-consumer. B-to-B has been happening all through and a new channel has been opened with the advent of the Internet. Obviously organisations will switch over to this channel for the cost-effectiveness that it provides. The market is emerging in the country and it will be a boom time in the next year," says Arvind Sharma, managing director of eSecureB-to-B.com Pvt. Ltd, a Hyderabad-based B-to-B-enabling company. Agrees Praveen Kumbnani, CTO, Agmoz, "The B-to-B E-commerce that is actually happening in India is not very high as compared to the projections made by several agencies. The B-to-B marketplaces are still in their infancy, and would take a little while to start walking."
The Digital Exchange Market analysts say only a centralised hub can cost-effectively connect and integrate with an army of trading partners. The elegance and importance of a centralised hub in a network of distributed nodes is that it is the most efficient and cost-effective means to connect and regulate the activity of the constituent parts. No wonder then that America's three auto majors-General Motors, Ford and DaimlerChrysler-who, all this while had been at each others' throat, have set aside their differences to create a virtual marketplace with Oracle and Commerce One as technology partners. The big three will collectively buy nearly $240 billion of auto parts every year from thousands of suppliers linked to Covisint, as this E-market has been named. The online exchange market is hotting up in India too. Taking a cue from the US, the most high-profile initiative as yet has come from auto companies. Eight major automobile establishments- Ashok Leyland, Bajaj Auto, the Hero group, Hindustan Motors, Mahindra & Mahindra, Maruti Udyog, Telco and TVS Suzuki-have formed an Indian version of Covisint. These companies account for nearly 80 per cent of the country's auto business and is a clear attempt to take the wind out of the sails of independent exchanges, such as the one backed by the Satyam group. To start with, these auto firms plan to combine their demand for a range of non-competitive products. Even a limited initiative like clubbing together their demand for maintenance and operation supplies could help them save close to Rs 50 crore. E-commerce major SIFY, too, has launched its auto Web exchange. The Kalyanis of Bharat Forge are putting together an industry consortium to set up an online auto components exchange. The other happening place in the B-to-B space is the steel sector, where Tisco, the Kalyani group and the Steel Authority of India (SAIL) have come together to set up an online steel exchange. The Essar group has helped promote clickforsteel.com in their personal capacity, but participating steel firms could end up as part-owners.
Big Players Show the Way Even as enablers are claiming to help organisations to develop E-commerce strategies, they are focusing on being industry-specific exchanges. Industry observers feel that the real B-to-B E-commerce will happen on the exchanges only. Sensing this, many companies and groups have started developing virtual exchanges or E-marketplaces wherein the industry people can come and meet, while transacting. The result of this is the birth of exchanges like indiamarkets.com, indiaengineering.com, agmoz.com, chemvalue. com, spinweave.com and infraex.com-all targeting specific industries and providing a common platform for them to interact and transact. "In exchanges there is a common interest for everybody to visit regularly and do some business. These will promote them and take care of its growth, which otherwise is very difficult for an individual company to transact with many players," points out Arvind Sharma of eSecureB-to-B. com, a Hyderabad-based B-to-B enabling company which is developing two sites, one for textiles and the other for infrastructure industries. As witnessed earlier, exchanges are being built by individual companies as well as a group of companies. A few (pure play) dotcoms are also developing these without any connection to the vertical segment they address. "It's now boom time for exchanges in the country. Not just the industry participants but others too are trying to enter this arena, since they have found money here. But it is the industry players who will finally emerge victorious, accompanied by big networked companies," cautions Satish Kumar, managing director of Pyxis Technology Solutions, which has developed the steelexchangeindia.com. "While big players are looking at E-commerce probably with the top-down approach or an industry-sponsored E-marketplace, they also have the hangover and large bills on account of the ERP era. Hence some of them are cautious about investing too much upfront, and this could prove advantageous for neutral E-marketplaces," explains Rohan Ajila, CEO, indiamarkets.com. But even these marketplaces seem to be on their own trip, not understanding the market needs and what the industry people look for from these exchanges. For example, many B-to-B exchanges focus on the spot markets in their industries (or imagine that such markets exist). By focussing on the exception, rather than the rule, they are bound to remain fringe players, starved of liquidity and ignored by most of the big firms in their industry. According to a report by AMR Research, a US-based consultancy firm, not a single one of the 600 B-to-B exchanges studied had reached even 1 per cent of the overall trading volume in its industry. "The more manageable option is to work with a single industry. But even here, few B-to-B exchanges have the money, industry knowledge and resources to succeed," says Arvind Sharma of eSecureB-to-B. These E-marketplaces hope that transactions will become standardised and the industry bigwigs will start participating in these exchanges. Even as the market is watching with bated breath, groups of companies are joining hands to develop their industry-specific exchanges. This again is in its infancy and is not luring the big players to join hands. Independent B-to-B exchanges have a higher probability of success over a company-sponsored one primarily because the customers still doubt the authenticity of content of the latter. There has been a lot of talk about industry-sponsored E-marketplaces. The problem these exchanges face is appropriately explained by the adage 'too many cooks spoil the broth', says Kumbnani of Agmoz.com. Meanwhile, in the last six months a number of companies have cropped up, claiming to help organisation adopt E-commerce. These services providers basically integrate the company with its suppliers and partners through the Net. They also allow transactions to be done with a provision for online payment and credit card punching. Further, these E-enablers have received a shot in the arm with the IT Bill coming into force. The Bill allows E-commerce transactions to be brought under the purview of the law and also introduces payment gateways in the country. "The backbone of the new economy or E-commerce is convenience, access to information, efficiency and transparency. B-to-B commerce enabled through the Internet is no exception and to a large extent is dependent on these factors," says Kumbnani of Agmoz.com, a crop protection industry exchange.
However, none of these so-called enablers can provide a complete range of services, especially content. The B-to-B portal enablers should be research-based content providers. But, in India this is missing, say experts. In the US, there are various companies who provide research-based content. The companies work on the '3C' model, that is, first they get content, then they make a community and after an online community is created, they conduct commerce. But, in India this is not really happening. Adds Kumbnani, "There are no content aggregators in our country. There is information on financial settlements, logistics or technologies, but these are not integrated. On the technology front, content on news is provided by some portal enablers. This is not enough for them to be called a total B-to-B enabling organisation. |
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Business-to-consumer
E-commerce is out of fashion; corporates and analysts worldwide are
shifting their bets on business-to-business transactions. Sales
predictions are running into trillions of dollars, but actual revenues are
still a trickle. What's ailing the B-to-B marketplaces, especially in
India? Is it security, faith, payment gateways or, simply, inertia?
