In the old days, when business-to-business (B2B) e-commerce solutions first started arriving on the scene, the projections for B2B Internet commerce were more than optimistic. Amidst the dot-com fever, even the largest companies started to panic: it was do or die. Your company had to be (or be seen to be doing) something `e`.
For solutions providers, the B2B market was the place to be. It was going to outstrip the consumer market by a factor of 10. Hundreds of e-commerce companies emerged with promises of taking over the areas of business traditionally ruled by ERP systems. These were dismissed as "legacy", destined to become subservient to the new kids on the block who would only deign to talk to them through unfortunate but necessary interfaces. The new systems would simply plug into any legacy system and all would be well.
Not quite. Many of the first wave adopters found that this legacy system interface was a bit more problematic than they were led to believe. Recent research reveals that the two biggest hurdles to implementation of e-commerce [pilots] are catalogue management and legacy system interface.
Even worse, the new systems, to anyone used to the rich functionality of an ERP system, were light in terms of what they actually did. The providers appeared to have some knowledge about the technologies they used but precious little about the business processes they purported to carry out and the problems that businesses were driven to solve.
In fact, one well-branded provider approached me about a year ago to ask if I would do some consultancy for them. "Sure," I said, "What`s the problem?" "Well, we`ve built this e-procurement/sales/trading hub/marketplace sort of thing and we want YOU to tell US what the advantages of using it would be to a client."
Curious!
They were one of the many systems providers trying to fit consumer e-commerce functionality into the business world. Some recognised a shortfall of many ERP systems - an ugly user interface. They used web technologies to make the GUI "as easy as Amazon" and marketed on the principle that, if the users COULD use the system, they WOULD use it. And, if the users DID use the system, the company, could control, by default, what individuals saw, what they could purchase, what suppliers they could use. The theory was that ultimately, you would be able to leverage the deals your professional buyers had struck with preferred suppliers. The elimination of "maverick" purchasing could (according to the research) save your company around 6% of MRO (maintenance, repair, operations) spend per annum which made the ROI extremely quick - months rather than years.
Then, these same providers saw that the likes of e-bay were doing quite well in the consumer world with auctioning functionality. Suddenly, the next big thing in corporate purchasing was going to be auctions!
Auctioning functionality is certainly a valid model for certain areas of corporate procurement. But in the wrong hands it`s simply "maverick" purchasing translated into an online environment. Many companies have also missed the point that, while consumers` buying decisions are usually based on a combination of brand trust and price, the majority of corporate entities base their buying decisions on a more complex combination of criteria - fitness for purpose, specification, value for money, lifetime cost and so on.
In effect, most "first wave" B2B providers had, at best, a shallow understanding of what actually drives professional procurement or how systems should be designed and implemented to bring real savings to the bottom line.
Then Nasdaq took a dive. With a few exceptions, investors started shifting their focus to companies old-fashioned enough to be actually making profits.
And the e-fever within corporations subsided. In fact, there was almost a smugness within corporates which only a few weeks before were concerned they were missing the e-boat.
The ERP e-commerce manager was the good guy again because he, at least, understood business requirements. Now all he had to do was apply the new technologies where they were relevant - still a challenge, but better than having a virtual solution looking for a real problem.
And so we come to the initial breaking of B2B Wave2.
B2B Wave2 is less prepossessed by ever emerging new technologies and how they can be sold to unsuspecting corporates, and more focussed on business requirements and how the new technologies might apply in context.
B2B Wave2 is already beginning to sift out the pretenders from the real players. E-commerce systems providers now consist of:
1. those who only ever had the technology;
2. those who have the technology and used their venture capital to build brand strength;
3. `traditional` IT solutions providers.
Companies in the first category are beginning to fall by the wayside. Or they have come to realise that, if they do have a value, what they do is far more niche than they first thought.
Second category companies are starting to get smart and the smartest are teaming up with companies smarter than themselves - in most cases, the `traditional` IT solutions providers. These `traditional` players (category 3) have their own reasons for doing this; it`s their way of becoming `e`. They understand their clients` requirements, they have a large installed client base, but they are `legacy`. Joining forces with a new e-commerce brand is a good proposition. It combines the stable with the leading edge.
These combinations will start to show the real potential that the Internet and its related technologies can offer businesses. New and genuinely second wave e-commerce solutions providers, which combine business and technological expertise, are emerging.
Second wave companies must demonstrate the technological expertise of the surviving first wave companies as well as the business expertise of the ERP providers. They will differentiate themselves by extending both of these attributes in combination with newer technologies: mobile, chip, security, digital identity, authentication and payment, all of which will be required for B2B Wave2.
Another key differentiator will be the ease with which payment can be integrated with procurement (and sales) transactions - the extent to which the back-end processes can be automated. No-one has really cracked that ... yet. Even the banking community and the payment providers are beginning to recognise that, in B2B e-commerce, it is the provision of commerce solutions rather than simply payment solutions that will determine their chances of survival.
How do you differentiate between the true B2B Wave2 providers, and the wannabes?
The next time someone tries to sell you an e-commerce solution, ask them to perform a very simple task. Tell them to put away their laptop and their PowerPoint presentation, get them a whiteboard and ask them to draw exactly how a purchasing/sales process works from beginning to end; from requirement to settlement and accounting. Then ask them to explain where their system fits, how it works and what benefits they expect you will accrue from using it.
This, at least, should tell you which wave the provider`s on and might save your company from jumping into uncharted waters.
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