Review:
CommerceNet 99 Conference – The New Digital Economy
By Bruce Carothers
The San Diego waterfront was the backdrop for this year’s gathering of ecommerce
vendors and customers, hosted by the CommerceNet trade association with some 500 member
companies. CommerceNet conducts a wide range of research projects, runs interoperability
labs, develops standards and policy, and promotes the ecommerce industry. The
conference was almost
entirely panel formats with lots of audience participation, much better than typical
hour-long droning speakers with a thousand powerpoints. The CommerceNet 99 conference
provided a forum to report results, discuss the current state of the market, and develop
plans for the future.
What’s all the fuss about?
Amazon and eBay are among the current darlings of online consumer ecommerce, where
individuals purchase everything from books to toys, flowers to computers, groceries to
travel. Even search portals are getting into the act – Yahoo users
purchased over $100 million in goods last month from the new Yahoo shopping
directory. All told, online shoppers will spend over $20
billion this year in the US alone.
But in today’s e-speed Internet world, the online consumer market is already
considered the minor leagues in some circles. In fact one speaker referred to
business-to-consumer markets as the “practice game” before the real event.
The numbers support this dismissive attitude, and they are
staggering.
Business-to-business ecommerce is projected to rocket from $43 billion in 1998 to more
than $1 trillion by 2003, according to Forrester, with other analysts making similar
forecasts. During the same period, the consumer market will grow from a
“mere” $7.8 billion to just over $100 billion. The net net: online
business commerce will exceed online consumer shopping by more than 10-fold in just a few
years. And while the land grab for consumer sites is well underway (and some would
say already saturated), the opportunity for B2B markets is just emerging.
Document Management and eCommerce
So how is all this B2B ecommerce actually conducted? Through the transfer of
business documents such as product data sheets, RFQ/RFPs, purchase orders, invoices,
shipping manifests – all the documents that we in the Document Management industry
have been scanning or indexing through various library systems and routing through
workflows. Now businesses are starting to realize that the real value of these
documents and the processes around them comes not just from internal capture and
management (been there, done that). Instead the real value comes from exchanging
these documents with customers and business partners in order to conduct business over the
net.
Document management professionals often have deep experience with the properties and
processing of these core business documents, which can add real value to project teams
charged with deploying ecommerce systems. IT professionals that know the
internal electronic document systems can ensure that external business transactions
correctly integrate with internal corporate systems. Several recent industry reports
have highlighted the problems of some 1st-generation ecommerce systems which collect
orders electronically over the net, but still rely on printed documents being keyed into
order entry systems. A strong document management or workflow expert would
have blown the whistle early on.
We all know documents are the currency of business. Real world experience gained
from automating the internal document processing can provide a rationale for getting on
that hot new ecommerce project down the hall. So get smart about ebusiness models
and technology, learn about how your customers and trading partners interact with your
company, and jump on the
ecommerce ride!
The Evolution of Document Exchange Standards
B2B commerce has traditionally been conducted through EDI transactions. But EDI
failed to gain wide use except in very controlled and relatively stable trading
communities such as automotive and government / aerospace industries. In general,
EDI has been too complex and too expensive for small to medium businesses to adopt.
A vendor recently suggested, “EDI is like clothing in the 70s. It seemed like a
good idea at the time, but we’re glad all that’s over”. Now everyone
wants to conduct business over the Internet, not through proprietary EDI networks.
In the new ecommerce markets, XML has become the technical standard for exchanging
documents and data about those documents through tags. However, while XML provides a
great mechanism to define and exchange information over the net, trading partners still
have to agree on the semantics. What you call Item Number, I might call Part Number
and another vendor might call
SKU. Are they the same data item or different? A related issue is the actual
document definition. This might be described in a Document Type Definition (DTD) or
a document schema. But if your layout for a purchase order is different from my
layout of a purchase order, we can’t do much
ecommerce.
This has resulted in a series of XML variants and vertical industry definition standards
such as Commerce XML (Ariba), Common Business Library (CommerceOne), Open Buying on the
Internet (OBI), Biztalk (Microsoft), Information Content and Exchange (Vignette),
RosettaNET and others. Not to be outdone, the CommerceNet association launched
their own ecommerce
interoperability standard called the Ecommerce Framework.
To be fair, not all of these standards are conflicting and some are complimentary.
For example, OBI is focused on buy/sell procurement transactions while RosettaNet is
focused on managing parts in the supply chain. However, many of these standards are
just emerging and have not been
widely adopted yet. In fact, once you get under the covers with many vendors their
current product offering is based on customized XML formats with unique point solutions
for each vendor interface and “connectors” for each standard. It works,
but it’s not pretty.
An OBI showcase was setup and running at the conference, with interoperable ecommerce
systems from barnesandnoble.com, Concur, EPIC, Office Depot, and SupplyWorks freely
searching each other’s product catalogs and exchanging buy/sell transactions.
The level of interoperability was impressive, but more than a few of the cross-system
transactions were in fact XML point
solution interfaces written specifically for a given vendor’s package.
Customers and vendors alike recognize that the market opportunity for interoperable
trading communities is too huge to address with point-to-point solutions, but it will take
time for vendors to implement these just-emerging standards and for the standards
themselves to sort out.
B2B eCommerce Market Overview
While the B2B ecommerce market is making dramatic changes almost daily, the universe can
be broadly defined by three key segments.
eCommerce Makers – These are the vendors that provide the infrastructure, application
products and delivery services required to conduct ecommerce. Firms like Ariba and
CommerceOne are leaders in licensed eBiz applications, typically for online procurement
(they also operate online trading markets where any business can purchase goods
online). Other vendors like Trilogy
and Vignette provide the core ecommerce server applications that companies use to setup
their ecommerce system. And vendors like Sapient and Viant provide the critical
systems design and integration services to actually implement all this great technology.
eCommerce Merchants – These are the “bricks and mortar” and dot.com
companies that use the technology provided by eCommerce enablers to sell their products
over the net. Leading IT vendors like Cisco and Dell are already driving billions in
annual revenue through their web sites. Other business commerce sites include
everyone from horizontal vendors like Officedepot.com to the thousands of niche suppliers
for pumps, electronic components, manufacturing supplies, etc within a vertical
industry. You can only purchase product from a single vendor at these merchant
sites.
eCommerce Markets – This is where all the action is. Rather than go direct to a
vendor site to purchase a widget, business buyers and sellers are flocking to new eMarket
hubs, where buyers can compare competing widgets from multiple vendors. These are
the eBay sites for business. Companies such as Chemdex (chemical products), e-Steel
(steel products), Healtheon (medical products and services), and VerticalNet (collection
of 50 vertical market hubs) have created a virtual community around horizontal or vertical
market segments. Because of the “network effect” that takes place when a
critical mass of buyers and sellers get together, these eMarket hubs will
drive and control the majority of B2B online transactions.
So what’s it cost to do business on the Web? Gartner recently reported that the
average ecommerce site cost more than $1 million, and is expected to increase by 25% each
year. The Gartner survey also reported that the average time to complete an
ecommerce site was about 6 months. Three
ecommerce investment categories were suggested: less than $1 million to “get on the
map”, $1 - $5 million to “run with the pack” and $5 - $20 million to be a
“market leader”. These numbers don’t include marketing and
advertising costs, which often exceed the site development costs.
Banner Ads Are Losing Ground
Banner ads are those annoying, flashing advertisements that crowd around the real content
you want to see on your favorite web page. Apparently the response rate or
click-through rate is less than half of one percent of all page views, considerably less
than the anemic 2% - 4% response rate for direct mail. Despite this dismal and
declining response rate, companies have invested hundreds of millions of dollars for
multi-year ad placement contracts with the major search engines. Apparently, some of these
firms are asking for their money back or more creative ways to showcase their wares.
So these major portal sites are moving toward online shopping directories, advertorial
placements, product reviews and much more narrowly targeted banner ads. Basically
anything to wrap content around the ad will improve the consumer value and selling
effectiveness.
Privacy vs Personalization
One of the more interesting panel discussions centered around the tradeoffs between
privacy and personalization. The recent outrage that erupted against RealNetworks
served to underline concerns in this area. (RealNetworks media player collects data on
what songs you download and
listen to, and then secretly transmits this back to the vendor). On the one hand,
consumers and businesses both benefit from personalization. If you go to Amazon, it
can suggest books you might enjoy based on previous buying. If you call a vendor to
reorder supplies, they can just renew your previous order configuration. One
panelist even suggested that we may soon see personalized coupons downloaded to our PDA or
phone device when we enter a retail store, based on our buying habits and interests
(that’s real 1:1 marketing!). On the other hand, this personalization and
convenience only comes by providing personal data. And of course this data can be
resold and
abused in many ways. We’ve all been pestered by telemarketers and spam email
from companies that bought our identity and consumer profile.
The panel seemed to agree on two positions:
businesses are much less sensitive to privacy issues than consumers when it comes to web
commerce.
consumers should always be asked for permission by the retailer before their data is used
for a “secondary” purpose, i.e. provided to another vendor.
eCommerce Cultural Barriers
As with large document management and ERP projects, implementing eCommerce systems can
have a profound impact on corporate culture. After all, who owns eCommerce?
Marketing, IT, Customer Service, Business Development, cross-functional project teams,
even the CEO are common answers. One speaker discussed painful internal turf wars
and power struggles for the
leadership role. Apparently the Chairman of the company declared that he was in
charge of the ecommerce initiative and anyone that didn’t recognize that would be
gone in 30 days.
eCommerce systems require a fundamental rethinking of the business fundamentals. How
will existing distribution channels be impacted by direct sales over the Web? How
will customer service track online orders? How will existing legacy systems be
integrated? What about linking supply vendors? All these issues cut across
many functional boundaries, making any single department the owner of ecommerce a poor
idea. The panelists seem to agree that the preferred organizational scheme was a
cross-functional project team reporting directly to the CEO, who serves as the ecommerce
champion.
Do Fish Drink Water?
Another conference highlight was a presentation by the chief Xerox Web Master, whose job
it is to answer all corporate email. Apparently Xerox considers this good customer
service (imagine that!) and they even respond to emails from non-customers. Over the
years, they have researched and
answered questions such as: Why is the sky blue? Do blind people see in their
dreams? What is the difference between partly cloudy and partly sunny? What is
the book held by the Statue of Liberty? Apparently, they answer over 100,000 such
emails each year. The most interesting ones have been published in a book called Do
Fish Drink Water? Very entertaining.
Resources
For information on the CommerceNet industry group, visit www.commercenet.com
For information on the new Ecommerce Interoperability Framework, visit eco.commerce.net.
For information on the OBI standard, visit www.openbuy.org
For information on Biztalk, visit www.biztalk.org
For information on RosettaNet, visit www.rosettanet.org
About the Author
Bruce Carothers is an eBusiness consultant, helping companies plan and implement their
eBusiness strategy. He is the founder and former CEO of Motiva Software, an eChange
solution for product design teams. He can be reached at bruce_carothers@email.msn.com.