The South African market is only large enough to sustain a maximum of three digital exchanges. This is the conclusion of four business-to-business (B2B) digital exchange industry players, who where panelists at a forum on B2B exchanges sponsored by the Financial Mail new economy supplement FutureCompany, and hosted by the Gordon Institute of Business Science.
The speakers represented four of the estimated 10 such exchanges currently operating in SA; CommerceOne SA, TradeWorld, Miraculum and Affinity Logic.
Alex Zwiegelaar, GM of Sasol`s Information and Logistics division, and CIO and a director of Sasol Technology, noted that Sasol`s move to the CommerceOne platform was driven by its mix of international competitors and collaborators.
The primary misconception about CommerceOne SA, Zwiegelaar said, is that it is an operation exclusive to Sasol`s suppliers and clients. That`s not so, he noted - it is an independent operation which now needs industry participation to establish standards of practice in the B2B exchange discipline. Zwiegelaar said there is "enormous interest" from other buyers and service providers to join CommerceOne SA.
Economies of scope
The newest kid on the B2B exchange block is no doubt Miraculum - the joint initiative between Dimension Data, Old Mutual, Nedcor and J&J, a services and e-commerce company formed by Jay Naidoo and Jayendra Naidoo.
Miraculum MD Brandon Spear said the business began in concept two years ago. He views Miraculum as "building a business eco-system" that is actively seeking partners in regional vertical market segments.
The South African digital exchange industry is definitely overtraded, said Spear. "There aren`t enough economies of scale to go around," he noted. "[The amount of players serves only to] create complexity in the market, slow adoption rates and proliferate confusion."
Spear believes that success lies in economies of scope, rather than scale - hence Miraculum`s horizontal focus. He noted that if South African exchanges are to profit, an international partner is a must. But, he said, not all vertical exchanges will emerge globally - healthcare, for one, is an industry sector that must emerge regionally to be truly effective.
Overtraded market
Richard van Rensburg, CEO of Affinity Logic, agreed: "The South African market is grossly overtraded." He said there`s no doubt that retailers will choose an exchange based more on the efficiency of the business processes offered and not so much on how the exchange works.
Tim Straw, founder and MD of Rainbow Software, brought the TradeWorld perspective to the forum. TradeWorld, a joint venture between Rainbow Software, Johnnic e-Ventures and I-Net Bridge, has an international focus, and involves stakeholders such as banks, insurance companies and freight handlers in the trade process.
Straw believes suppliers will soon come under pressure from buyers demanding immediate action - an attitude which will be driven by the speeded up processes enabled by exchanges. However, suppliers too are confused as to what direction to move in, particularly if they aren`t able to integrate in just one way with any number of exchanges. An open standards system between exchanges is imperative, the panelists agreed.
Higher on the priority list is internal integration. Van Rensburg stressed the importance of companies having integrated enterprise resource planning systems before even venturing onto a digital exchange. He dispensed some tongue-in-cheek advice: "The Internet is such fluid technology that it compresses trading time... and if your internal integration is not there [to support the back end paperwork at the same speed], don`t even worry about the Internet. Just wait until you go bankrupt."
Lack of discipline
All panelists agreed that South African companies are not quite ready for the kind of business efficiencies demanded by digital exchanges. Zwiegelaar puts this down to a lack of discipline. "The biggest impact of digital exchanges will not be on the re-engineering of your business, but rather adjusting the attitude of your staff. They must be disciplined enough to make sure the correct information is always available."
A huge opportunity was identified for players in the logistics industry, to ensure fulfillment of products procured through exchanges. Another trend is that of the emergence of new business models based on the value parameters of level of integration and speed to delivery.
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