InformationWeek

August 28, 2000

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E-Data For A Price

continued...page 3 of 3

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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Online marketplaces aren't the first to discover the value of providing their buyers and sellers with business intelligence. As E-marketplaces try to muscle in on the turf held by traditional distributors, more and more distributors are pushing back by providing their customers--on both the buyer and seller sides--with purchasing information and sophisticated data-analysis services as a means of staying competitive.

A case in point: Owens & Minor Inc., a 118-year-old distributor of medical and surgical supplies to hospitals and other medical institutions. In April 1999, the company went live with a 150-Gbyte data warehouse called Wisdom (Web Intelligence Supporting Decisions from Owens & Minor), which it makes available to buyers and suppliers of medical products. Hospitals, Owens & Minor's primary customers, tap in to the data to manage their purchasing budgets, monitor order-fill rates for service-level compliance, and check their eligibility for volume rebates. Medical-product manufacturers and distributors can check inventory levels at Owens & Minor, calculate market share, and analyze order activity--right down to individual customers, according to Don Stoller, Owens & Minor's information management director. The company provides buyers and suppliers with browser access to the data warehouse through reporting and query software from Business Objects SA and report templates.

As of the end of May, 66 health-care providers representing a quarter of Owens & Minor's sales were using Wisdom, as were six of the company's 10 largest suppliers. For its services, Owens & Minor charges both buyers and suppliers a one-time $1,500 fee, plus a per-user monthly fee that ranges from $250 to $1,250, depending on factors such as the volume of business the buyer or seller does with the distributor. That generated some $125,000 in revenue in 1999 and is expected to bring in $1 million this year, the company says. Stoller says Wisdom was a key factor in winning more than $60 million in new business for the company in the past year and expanding existing business by more than $100 million.

E-marketplace operators will make money from business intelligence in two ways, says Vernon Keenan, an Internet analyst and CEO of Keenan Vision. In an early phase, exchange operators will collect transaction data, aggregate and summarize it, and sell it to manufacturers and suppliers for market intelligence. Keenan cites Instill as an example.

As the volume of Internet-exchange business grows, more online-marketplace operators will offer business-intelligence services to participants "to help them with their pricing and marketing decisions," Keenan says. While Keenan Vision predicts those services will generate as much as $500 million in revenue this year, most exchanges won't provide such services until next year, Keenan says. Revenue from these business-intelligence services is projected to grow to $9.2 billion in 2004.

All this activity hasn't gone unnoticed by vendors of supply-chain, E-business, and business-intelligence software. Many have products under development that target this space, or are forming alliances to bring their respective E-commerce and E-intelligence technologies together.

Earlier this month, for example, SAP and Commerce One Inc. unveiled EnterpriseBuyer, a suite of jointly developed E-procurement applications that are integrated with the data-extraction and business-intelligence capabilities of SAP's Business Information Warehouse technology. In May, i2 Technologies Inc. struck a deal with Hyperion Solutions Corp. to integrate Hyperion's Essbase online analytical processing server with i2's TradeMatrix E-marketplace platform, allowing TradeMatrix licensees to access, analyze, report, and forecast customer and supplier transactions. Oracle already provides a way to extract data from its Oracle Exchange online, using its Oracle Reports query and reporting tool.

The need for online-marketplace intelligence is also attracting small software vendors. DecisionPoint Applications Inc., a supplier of packaged data-warehouse systems, is developing tools (slated for November) that will extract transaction data for analysis from electronic-procurement systems from Ariba, Commerce One, and Viquity. Startup Tilion Inc. is developing software, for a late-fall debut, that will capture and process XML-based data from online exchanges and supply-chain systems. GE's GXS division is one of the companies investigating early versions of Tilion's software.

Users of online marketplaces today are focusing on streamlining the buying and selling process and reducing transaction costs--in much the same way ERP systems were installed to improve the efficiency of business processes. Over time, owners of ERP software realized those systems could be treasure troves of valuable data. Operators and users of E-marketplaces are quickly making the same discovery.