Commerce One Inc. and SAP are bullish about online marketplaces. The leaders of each company, Mark Hoffman, CEO of Commerce One, and Hasso Plattner, co-chairman and founder of SAP AG, led a discussion on the current state and the future possibilities of online trading exchanges at a roundtable Monday that kicked off Commerce One's customer conference in Las Vegas. Their optimism was tempered by some online marketplace operators, E-business executives, and industry experts who participated in the discussion, including representatives from General Electric's E-business unit, Microsoft, PricewaterhouseCoopers, and online marketplaces, Exostar and Pantellos Group.

Addressing mounting skepticism about the viability and capabilities of online marketplaces, Hoffman predicts that the market will eventually support thousands of thriving exchanges and asserts that exchanges are quickly evolving to enable more complex and sophisticated types of business transactions than purchasing office supplies. Others on the panel and in the audience noted that business-to-business commerce via online marketplaces isn't without challenges and uncertainties. Creating a sustainable business model, engaging buyers and sellers, and automating and integrating business transactions is no cakewalk for online marketplaces. "This is all still in the very early stages," says David Schnieder, a managing partner at PricewaterhouseCoopers. "No one has a good vantage point yet, and there are a lot of changes ahead."

One hurdle still facing many marketplaces is convincing companies to buy and sell their wares on their exchanges. Suppliers, they say, are wary of losing brand equity and margins as a result of competing primarily on price. Buyers are wary of the return on investment. In a telling exercise, audience members participated in an informal survey about their roles in online exchanges. About a dozen out of 100 people had participated as buyers on an exchange and half a dozen had participated as suppliers. More than half the audience were E-business software and service providers. "There's a reluctance on the supplier's side," says Skip Shaw, acting chief operating officer for Exostar, an online marketplace for the aerospace industry. "It's taken longer than we thought to convince them to participate."

Commerce One and other proponents on the panel argued that cost-savings will come from productivity and efficiency gains for buyers and suppliers, as well as increased price competition. But not everyone's swallowing it. A buyer from Kira Inc., a construction contractor for the government in Vienna, Virginia, voiced concern about the ability of an online exchange to quickly deliver cost-savings and benefits in industries such as housing construction, which operate on iterative pricing and contract negotiation. "Integrated solutions sound nice but I can't afford it," says Carlos Garcia, of Kira Inc., "I need savings off the bat."

Still, marketplace operators like Exostar and Pantellos say that their success in the long-term depends on their ability to deliver cost-savings, to speed up decision-making, to create more effective trading relationships, and to improve customer service.

Also Monday, Commerce One and SAP said they have finalized an agreement to jointly develop and market business-to-business E-commerce software, which they announced in June. Their first co-branded product, called Market Set, is available now.