Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
Boom or Gloom?
The Future of B2B
Exchanges
Twin Cities Electronic Commerce
Forum
May 9, 2001
Mike Ellsworth
Stratvantage Consulting, LLC
Copyright © 2001 Stratvantage Consulting, LLC
1
Agenda
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
•
•
•
•
Current State of B2B Exchanges
The Current View: Trends for B2B Exchanges
Near Term: Opportunities and Consolidations
Mid Term: Competition, Extinctions, the X2X
Future
• End Game: The 21st Century Supply Chain
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The Elephant
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
The Blind Man Assesses the B2B
Marketplace
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Current State of B2B
Exchanges
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• More than 1500 different industryspecific marketplaces
• Three main types of Exchanges:
– Public Exchange – independent
– Captive Exchange – controlled by gorillas
– COBAMs
– Private Exchange –
proprietary
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The Current View:
Trends for B2B Exchanges
• Growth?
Delphi
B2B Summit
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Plantation
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Florida
November 29 December 1,
2000
– Industry analysts predict 2,000 to 10,000
marketplaces by the end of 2003
• Or Crunch?
– AMR Research predicts the more than 600
Exchanges today reduced to
50-100 in 2001
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The Current View:
Three Waves
• McKinsey identifies three waves of B2B:
Delphi
B2B Summit
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Plantation
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Florida
November 29 December 1,
2000
– Independent dotcom exchanges (PaperExchange,
eSteel)
– COBAM buyer-led or seller-led exchanges
(Covisint, WWRE, Novopoint)
– Back to basics: source procurement based on
type of goods
• Public Exchange for commodities
• COBAM for industry-specific
• Extended supply chain for custom or direct
goods
1998
1999
2000
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2001
2002
2003
2004
2005
6
Myth vs. Reality
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• The Myth that the Exchange is the Thing
– Focused on purchasing MRO or commodities
– Emphasis on transactions and prices
• Reality:
– Technology developed for B2B e-commerce
will have unanticipated effects
– There’s much more to B2B than procurement
• Content, Collaboration, Process Automation
– There’s more to procurement than indirect
materials
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7
Supply Chain =
Value Chain
“It's about connecting the existing buyers
Delphi
and sellers. So it's not a disintermediation
B2B Summit
play at all. In fact, you're taking people
who are doing business today and allowing
them to do it more efficiently. You need the
existing players. You partner with them
rather than compete with them.”
-- David Perry,
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
CEO, Ventro
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Myth vs. Reality
• The Myth of Disintermediation
Delphi
B2B Summit
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Florida
November 29 December 1,
2000
– “Online beats offline, clicks beat bricks, surf
beats turf, e-tailing beats retailing”
– Bricks and Mortar (BAM) companies are at a
disadvantage
• Reality:
– You cannot replace an intermediary without
(at least) replacing or (at best) improving on
its functions
– Amazon is building warehouses
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Myth vs. Reality
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• The Myth of Hands-Off Regulators
– Online transactions not taxed – for now
– Competitors can cooperate in creating
exchanges
• Reality:
– FTC held workshop May 7 - 8
– Government approved Covisint but still
worries about collusion
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XBasics: Value Chain
A Two Sided Coin
Delphi
B2B Summit
Amelia Island
Plantation
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Florida
November 29 December 1,
2000
• Exchanges not willing to partner with,
replace or improve the functions of
intermediaries will not survive
• Intermediaries who are not providing
value will be replaced
– Example: XSAg vs. agricultural distributors
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Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
The Future of Exchanges
November 29 December 1,
2000
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No One Dares Look
Beyond 2006
Delphi
B2B Summit
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Plantation
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November 29 December 1,
2000
• Delphi Group:
– 90% of Fortune 1000 join a trading
community by the end of 2001
• U.S. SBA:
– small business
e-commerce sales to
$300 billion by 2002
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No One Dares Look
Beyond 2006
Delphi
B2B Summit
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Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• Forrester:
– Companies will spend $5.4 million to $22.9
million each getting connected to exchanges
through 2006
– Internet hosting to $16.8 billion in 2002
– B2B services to $228 billion market by 2003
– Banner advertising to $720
million in 2003
– trade via real-time models will
reach $746 billion in 2004
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No One Dares Look
Beyond 2006
Delphi
B2B Summit
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Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• Morgan Stanley Dean Witter:
corporate goods obtained through
auction to 5 percent by 2003
• Yankee Group:
marketplace transactions
$850 billion by 2004
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15
In Fact, It’s Insane . . .
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
• With the rapid pace of change, it’s
insane to look beyond 6 to 12 months .
. . That’s long range planning!
November 29 December 1,
2000
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Let’s Take a Look at the
Next 10 Years
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
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X2X Timeline
Forrester: hosting
$16.8B
US SBA: SME
Delphi
ecomm $300B
B2B Summit
Amelia Island
Plantation
FCC E911
Mandate
Amelia Island,
Florida
Wireless: 3G
EDGE in
practice
IDC: 70% of
SME online;
2.9M selling
Internet out
of addresses
Forrester:
B2B services
$228B
2002
2003
Gartner:
entire supply
chain
automated
Gartner:
$7.3T in
spending
November 29 December 1,
2000
2001
Delphi: 90% F2000
trading online
Gartner: 600M
mobile phones;
40% workforce
mobile
MSDW:
corp goods
@ auction
= 5%
2004
Keenan Vision:
$1.6T in tx; 63.4
public
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2005
4G wireless
networks @
5 – 10 Mbps
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XTrends
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• Powerful Net Edges
•
(P2P)
•
• Wireless – WAP, MIX •
• Devices/PDAs
•
• Bluetooth/Wireless
•
Payment
• Storage on Net
•
• Bandwidth
Explosion/IPng
• Personalization/Profiling
Position-based services
Portal Power Wanes
Content Management
Change Management
Syndicated Market
Research
X2X Connectivity
Copyright © 2001 Stratvantage Consulting, LLC
19
XTrend: It’s the
Supply Chain, Stupid!
• “We believe that the next wave in supply
Delphi
chain management or B2B is about to be
B2B Summit
rolled out. We expect the next wave to
reduce retailers net investment in
inventory to near zero, pull inventory out
of the channel reducing markdown
pressures and transaction
costs, and substantially
reduce out of stocks.”
Amelia Island
Plantation
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Florida
November 29 December 1,
2000
Source: Donaldson, Lufkin & Jenrette
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Case in Point:
Scan Based Trading
Delphi
B2B Summit
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Plantation
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November 29 December 1,
2000
• Pay When You Sell, Not When You Buy
• Retailers only pay for merchandise
after it has been purchased by a
customer and scanned at the cash
register
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Impact of Supply Chain
Efficiency
• Retailers will finance their inventory with
Delphi
payables
B2B Summit
• Other implications:
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
–
–
–
–
reduction in shrink potential
improvement in inventory flow
reduction in inventory
reduced inventory handling
costs
• Vendors will benefit from better information
flow from the retail store,
helps them better plan inventory
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What Made This Possible?
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• The same technology that enables
Exchanges
• Under EDI, implementing SBT too
expensive and cumbersome
• XML applications allow
for substantially
reduced transaction
costs
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23
Where’s the Exchange?
Delphi
B2B Summit
• Where’s the stand-alone Exchange in
this scenario?
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
Maybe nowhere
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Where’s the Exchange?
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
• GartnerGroup estimates there may be
as many as 30,000 private exchanges
in various stages of development today
November 29 December 1,
2000
Copyright © 2001 Stratvantage Consulting, LLC
25
A Rosy B2B Future?
• GartnerGroup estimates $7.3 trillion in
global corporate spending in 2004, up
from $145 billion last year
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• By 2005, "the entire supply chain
between suppliers and buyers
will be automated”
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Future Supply Chain
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
The entire supply chain between
suppliers and buyers will be
automated!!
How?
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27
X2X Drivers:
Exchange Truisms
• The market seeks efficiency
Delphi
• On the Internet, everything devolves to free
B2B Summit
Amelia Island •
Belonging to many Exchanges and paying many fees
Plantation
is not efficient
• Only those intermediaries with a compelling value
proposition will not be disintermediated
• Devolutionary pressure will
strip revenue potential from the
Exchange market
Amelia Island,
Florida
November 29 December 1,
2000
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2001: Network Effects
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• Private Exchanges threaten to
take over
– Evolution of collaborative extranets
– Captive supply chain
– Private RFQ process to keep competitive
secrets
– Suppliers will need
interoperability with
hundreds of customers
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29
2002-2005:
Consolidation
• Digital Darwinism
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
– Hundreds of Exchanges consolidate –
through attrition and merger – into
dozens
• X2X: Integrate with other
marketplaces
– Seamlessly interconnect
– Single log on
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2006 - 2008:
Regulatory Effects
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
• X2X peaks
• Independent Exchanges are favored
• Gorillas have tasted the fruit of their
own Exchanges
• Gorillas vow to own their
supply chains
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2008 - 2011:
Seamlessness
• Just as the stand-alone PC will disappear
Delphi
into your environment, the Exchange will
B2B Summit
disappear into normal business practices
• By 2010 there are few stand-alone
exchanges; there’s just
trading
• X2X submerges into the
global business net
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
Copyright © 2001 Stratvantage Consulting, LLC
32
Thank You
Delphi
B2B Summit
Amelia Island
Plantation
Amelia Island,
Florida
November 29 December 1,
2000
Mike Ellsworth
Stratvantage Consulting, LLC
Internet strategy and permission marketing
[email protected]
www.stratvantage.com
Copyright © 2001 Stratvantage Consulting, LLC
33