Transcript Agenda - October 27

e-Marketplaces
The End of the Beginning Is Near
Ken Horner
June 5, 2000
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Today’s Discussion
• B2B Market Overview
• e-Marketplaces Models and Transaction Mechanisms
• The Future of e-Marketplaces
• Tax and Regulatory Connections
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B2B Market Overview
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B2B: What is it and why is it important?
– B2B is about the exchange of
information between
organizations for the purpose
of conducting commerce.
– The information exchange
can occur using:
– B2B enables organizations to
move toward integration of
business processes across
extended enterprises
(collaboration) leading to
substantial operational &
financial improvements
• Internet
• Private data networks
• Voice networks
• etc.
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Why B2B Now?
Market Factors
Technology Factors






 Market leading companies have
growth problems
 Financial Incentives:
 Operating efficiencies,
cost savings
 New revenue opportunities
 Regulatory tax benefits
 Web spending is increasing
 Real-time information improves supply
and demand management
 Internet wealth creation has been
unprecedented
 A lot more VC money chasing deals
ERP Infrastructure Investment
Web Infrastructure
High Bandwidth Capacity
Data Storage Capability
Advanced Security Technology
XML provides for more intelligent
data exchanges between
web sites and
back-end systems
Source: MSDW Internet Research
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B2B Market Potential
It’s BIG and it’s growing rapidly
e-Commerce Market Size
United States
1,400
1,200
US$ Billions
e
1,000
800
600
400
B2C
200
B2B
0
1998
1999
2000
2001P
2002 P
2003 P
Source: Deloitte Research and Forrester Research
• Note that B2B will far outpace B2C
• Gartner predicts B2B worldwide in 2004 to reach $7.3 trillion
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A Flurry of Deals in Recent Months Demonstrate Traditional
Players’ Hurried Pursuit of the e-Marketplace Opportunity
e-Marketplace Momentum
PurePlay
Vertical Markets
Gain Momentum
Technology
Enablers Arrive
• Ariba
• CommerceOne
• Oracle
•
•
•
•
•
•
Chemdex.com
VerticalNet.com
Plasticsnet.com
SciQuest.com
Partsbase.com
Networkoil.com
Traditional Players
Enter the
e-Procurement Space
•
•
•
•
•
•
•
1999
1998
Autoexchange
Sears/Carrefour/Oracle
Boeing/Oracle
Shell/CommerceOne
Chevron/Ariba
Citibank/CommerceOne
Bank Of America/Ariba
Recent
months
Today
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Map of Existing B2B Digital Marketplaces
Note: As of February 2000
Source: Broadview
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A Significant Portion of the Future B2B Market will be in e-Marketplaces
B2B Revenues, in 2004: $7.3 trillion
e-Marketplaces
37%
Opportunities in this market exist for:
• e-Marketplace Hosts/Market Makers
• Software Application Developers
• e-Marketplace Promoters
• Bandwidth and Storage Players
Other
63%
Source: Gartner Group and Deloitte Research: “Online B2B Exchanges”
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e-Marketplace Models
and Transaction Mechanisms
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e-Commerce Has Evolved as Technology Has Advanced
B2B e-Marketplaces
S
Suppliers
B
Buyers
Buyer Solutions
Website Sales
S
S
S
S
B
Information Distribution
B
B
B
S
S
S
S
B
B2B
B
B
B
Aggregation of
many-to-many transactions
Catalogs, procurement workflow
S
B
EDI Networks
B
B
S
S
S
S
B
B Information, configuration, and Order-taking
S
B
B Information on-line, sales off-line
B
Closed, expensive, non-scalable
Time
1996
1997
1998
1999
2000
Time
Source: Adapted from MSDW Internet Research
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e-Marketplace Models May Vary Significantly Depending Upon
Market Dynamics
• Industry exchanges - vertical exchanges that manage
many-to-many relationships and focus on specific industry
needs
• Product exchanges - horizontal exchanges that manage
many-to-many relationships and focus on general needs
• Exchange Portals - marketplaces dedicated to aggregating
exchanges into a one-stop “super exchange”
• Hub-Based Exchanges - a marketplaces where large
vendors directly link to their suppliers and trading partners
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Additional B2B Trading Exchange Business Models
•
Capacity Brokers – rid the industry of excess capacity; solves a problem
and helps pricing; anonymous trading
•
Gray Market Facilitators – for used and resold equipment away from
the original manufacturer
•
Collaboration Platforms – long time trading partners use the Internet for
improved efficiency; pre-negotiated terms; many business processes
beyond buying and selling
•
Spot Buying – Emergency supplies and ad hoc needs for research
•
Distributor Networks – Distributors can load balance inventory with
each other; car dealer model
•
Proposal Publishing – Request for proposals to initiate complex
transactions in time; start of process but post contract project
management continues for months
•
Private Exchanges – closed communities; supply chains dominated by
one anchor tenant; private sourcing networks
•
Industry Community Boards – Industry meeting place; trade journal
replacement; discussion forums; Web conferences
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e-Marketplace Mechanisms
Each of these transaction mechanisms creates a distinct
market dynamic
Auction - provides a venue for the purchase and sale of products
& services that are often one-of-a-kind, non-standard, or
perishable; pricing is dynamic and competitive bidding process
usually results in upward price movement
Catalog - takes content of multiple vendors, digitize the product
information and provide buyers with one-stop shopping over the
Internet; allows buyers to search for products more efficiently;
creates value by aggregating buyers and suppliers
Reverse Auction – provides a venue for the purchase and sale
of products and services; initiated by the buyer; competition among
sellers results in downward price movement
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What Do the Numbers Say?
Goldman Sachs believes a typical exchange might produce the
following operating results
Revenue Line Items
Auction Commissions
Electronic Commerce
Software Licenses
Content Subscriptions
Advertising
Total Revenues
30%
25%
20%
15%
10%
100%
Gross Margin by Line Item
Auction Commissions
80%
Electronic Commerce
10-15%
Software Licenses
90%
Content Subscriptions
50%
Advertising
90%
Blended Gross Margin 55%
Sales&Marketing
Product Development
G&A
Operating Margin
25%
10%
5%
!
10-15%
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The Future of e-Marketplaces
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If Things Go As Planned…..
Deloitte Consulting’s Crystal Ball Says That:
• We will repeat history as it seems many people
have failed to learn from it.
• Complexity will be overwhelmed by simpler
solutions.
• Taxonomies or the lack thereof will limit the rate of
adoption.
• The financial marketplaces and operational
practices will provide good guides as to regulator
roles.
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Recipe for Success
Successful e-Marketplaces will Address the Following Critical
Success Factors
Create Network
Effect
(Volume and Liquidity)
Sticky Value
Proposition
First Mover
Advantage
CRITICAL
SUCCESS
FACTORS
Domain Expertise
(Content and execution
capabilities)
User-Friendly
Interface
Integrate to Backend Systems
(Seamless integration)
Brand Name
(Trust and execution
capabilities)
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What could go wrong?
Despite the “hype” there are still many obstacles to overcome
•
Numerous technology platforms with still limited functionality
•
No cross-industry technology and process standards exist
•
Implementation time and investment are greater than expected
•
Buyer and supplier readiness
•
Undeveloped regulatory environment
•
Largely undefined business models
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And the “Crystal Ball” Also Says…
•
Number of eMarketplaces
Massive consolidation will follow
rapid growth
– From 9000+exchanges in 3 years to
several major player per industry
9000+
e-Markets
•
“Deep” is better than “Broad”
– Industry verticals have a higher
chance of success due to their more
focused nature
•
– Initially regional markets will
dominate to avoid additional
transaction complexity (currency
exchange, tax and duty implications,
etc.)
4000+
e-Markets
•
1998
2000
2002
Regional Vs. Global Players
2004
Regulatory bodies will play key role
on moderating the growth
– Antitrust implications of on-line
markets (Auto-exchange)
– Tax implications (sales tax, custom
duty, etc)
2006
Time
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Tax and Regulatory Connections
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e-Marketplaces Could Create Efficiencies….or Monopolies
Regulators are taking a closer look at some of the big
e-Marketplaces
• Federal Trade Commission and Department of
Justice are looking into the Automotive Industry
Exchange planned by GM, Ford, and
Daimler/Chrysler
• Department of Justice and Senate Commerce
Committee plan to investigate an on-line
ticketing exchange funded by Delta, Continental,
Northwest, United and American Airlines
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Regulators as Moderators of e-Marketplace Growth
Defining the rules and the business model will accelerate the growth
of e-Marketplaces
• Anonymity of bidders
• Limited pricing forecast to avoid signaling
• Membership rules
• Confidentiality of transaction information
• Tax and duty responsibilities (members vs. the
exchange)
• Steep penalties for “cheating”
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Tax Worries – How to get ready?
Preparation for the explosion of on-line B2B buying is essential
•
How should current rules be treated in an on-line
environment?
–
–
–
–
–
Intangible property ownership
Sales taxes
VAT and customs duties
Transactions classification
Operational geography
• Tax anti-deferral rules
• Where is the “nexus”?
•
How to ensure compliance?
– Information management and reporting
– Responsible parties (exchange vs. customer)
– Third party roles
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In Conclusion…
Chaos, turmoil, uncertainty, fear and doubt will reign for some time
to come. But….
• That shouldn’t stop you from getting involved
and crafting a point of view.
• We are positioning ourselves as both
facilitators and conduits for information and
issues for all the parties.
• The opportunities are enormous and the
impacts will be profound. We encourage you
to work with us and our clients.
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THANKS.
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