InformationWeek

February 8, 1999

Inside the IT Value Chain

Links Mean Value

Competitive Edge

Customer Service Has Its Costs

Value Chain Benefits Still To Come

Slow Revolution In E-Commerce

Get Creative In Sharing Knowledge

Business Value Of Communications

Tighten Links In Value Chains

Executive Reports:
Slow Revolution In E-Commerce

The Internet has the potential to link all partners in a business value chain, but the process will take time

By Clinton Wilder

long-term, fundamental revolution is occurring in Internet commerce at the frontier of the business value chain. Major players in established industries are laying plans for dynamic changes in the way business will be done in the Internet age. The presence of a global, ubiquitous, and relatively inexpensive public network has the potential to link all of the partners in a business value chain for online commerce and collaboration.

But many pioneers find that progress is slow. The Automotive Network Exchange (ANX), the world's largest extranet initiative, has fewer than 30 active participants, compared with its stated goal of 10,000-plus. Steelmakers Weirton Steel, LTV, and Steel Dynamics launched their online industry marketplace MetalSite with great fanfare last summer, but just added sales-transaction capability to the site in December.

However, slow going should be expected. The ambitious goal of ANX, for example, is a standard, online process for communicationsamong Detroit's Big Three, overseas automakers, and the thousands of manufacturers that supply them with parts and services.

"An online value chain involves a lot more than selling," says Bud Mathaisel, CIO of Ford Motor Co. "We're talking about a whole new set of business models and changing the way we interact with each other." In that context, everyone's No. 1 concern about Internet commerce--security--takes on a whole new meaning. A consumer worrying about a stolen credit-card number on the Net is one thing; Ford's concern that General Motors mightaccess its CAD schematics for next year's models is quite another.

Bud Mathaisel

Frontiers are not easy places in which to thrive, but some companies are staking out territory there as a matter of survival. Northern Trust Co., a Chicago bank with $25 billion in assets, saw its traditional commercial lockbox business threatened by the potential of electronic bill presentment and payment--the ability for businesses to review invoices and settle their accounts with each other on the Net. So Northern launched NetTransact, which also acts as an aggregator, giving a supermarket chain, for example, one place to review the bills from several food and packaged-goods suppliers. "We are building a billing community," says Brian Hinton, a VP at Northern Trust.

MetalSite, like ANX, is attempting to redefine an industrial business model. The difference is that instead of supply-chain partners, MetalSite is bringing together buyers and sellers online to address one of the industry's most intransigent business problems: surplus inventory. MetalSite's goal is to be a one-stop destination where producers can find buyers at a fair price.

It has already accomplished something few in the steel industry thought possible--bringing together three direct competitors. Weirton, LTV, and Steel Dynamics will compete for sales through MetalSite as they do in the traditional marketplace, but the companies perceived a value proposition in MetalSite that justified breaking the rules and old models about working with competitors.

That's the kind of thing that happens on the frontier.

Clinton Wilder, a senior writer at InformationWeek, covers electronic commerce.

Illustration by Matsu