InformationWeek: The Business Value of Technology

August 28, 2000

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E-Data For A Price

E-marketplace operators are beginning to collect, analyze, and charge for transaction data. For marketplace users, this type of business intelligence can shed light on a key question: How to use these new commerce outlets as a smart way to do business.

By Rick Whiting

More on E-marketplaces:

TechWeb E-Business Exchanges Fight For Survival (8/11/00) TechWeb Buyers Outpace Sellers In E-marketplaces (8/2/00) InternetWeek Exchange Will Trade Coffee (7/17/00)

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nline business-to-business marketplaces are supposed to lower transaction costs and speed delivery of everything from automotive parts and chemicals to fresh vegetables. But how can buyers and sellers be sure those expectations are being met?

Without information about order-fulfillment rates, shipping times, and transaction costs, participants have no way to know whether they're realizing the benefits of a marketplace, says David Levine, global alliance manager at General Electric's Global Exchange Services (GXS) division in Gaithersburg, Md., which operates a worldwide business-to-business E-commerce network. "Gathering and disseminating such data is going to be one of the keys to success of this new model," he says.

Operators of online marketplaces are starting to realize that offering data-collection and data-analysis services to buyers and sellers can be a way to differentiate themselves in crowded markets. "If it's appropriately gathered and managed, the data can be used for forecasting and predictability in a much broader supply chain," says Kevin Costello, a managing partner for digital market solutions at Arthur Andersen. That's why more marketplaces are considering data mining and business-intelligence tools to gather, explore, and parse the data they collect. Vendors are responding with products aimed at the specific needs of online marketplaces to make sense of the flow of information over the Internet.

Online exchanges and marketplaces certainly generate a tremendous amount of information--about customers, suppliers, markets, transaction costs, the prices at which products are bought and sold, and order-fulfillment rates. By 2004, the volume of worldwide business-to-business E-commerce will reach $2.7 trillion, and 53% of that commerce will be conducted through online marketplaces, predicts Forrester Research. As the volume of E-marketplace business increases, so does the need to collect and analyze information about the transactions.

Business-intelligence services will also become a means of generating additional revenue. A recent Forrester Research survey found that almost three-quarters of online marketplaces plan to charge fees for data-collection and analysis services by next year, up from 18% in 1999. That's not surprising, since the transaction fees E-marketplace operators charge will drop from 2% of sales today to 0.6% in 2004, according to Keenan Vision, a market research firm.

Some E-marketplaces already provide buyers and suppliers extended supply-chain intelligence. E-Steel Corp., which operates an online exchange for the steel industry, recently gave its buyer-members the ability to pull transaction data from the exchange into their enterprise resource planning systems. E-Steel is implementing a hub-and-spoke system that uses business-to-business integration software from WebMethods Inc., says E-Steel chief technology officer Tom Costello.

The hub--the software residing at the E-Steel site--communicates with the spokes, or software residing at exchange buyer and seller sites. Data from the buyers' and sellers' back-office systems is translated into the Steel Markup Language, a version of the Extensible Markup Language developed by E-Steel, and is fed to the hub. Users of the exchange who want direct integration with the system have to implement the spoke technology, which is based on WebMethods' B-to-B Partner server software, and adapters that link the spokes to their back-office systems.

All this gives steel buyers a "virtual view" of steel manufacturers' supply chains, which ultimately could enable just-in-time manufacturing and inventory reductions in an industry where maintaining excess inventory to keep production lines up and running is the rule. For example, when inventory sells on the exchange, the seller's back-office systems are automatically alerted to the sale. The inventory-management system is notified, the shipping department is prompted to fetch the supplies being sold, and shipping labels are automatically printed. Buyers' systems automatically receive notification of shipping schedules, and arrange financing for the purchase.

"Buyers can go into the exchange, search on suppliers that have the specific product at the moment they need it, buy it, and immediately know when the product can be ready for shipment," Costello says. Buyers can also track the shipments' progress. Three E-Steel buyers, including Ford Motor Co., are implementing the software they need to retrieve the E-Steel marketplace data.

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Illustration by Gerard Dubois
Photo of Storch by Alan Blaustein

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