Hype perhaps, but e-markets are hot

By ADAM GIFFORD

Business to business electronic marketplaces earned a lot of talking time at last week's electronic commerce summit.

Speaker after speaker outlined the wonderful things they were doing to create an electronic marketplace in their particular niche or how their procurement system would save a bunch of money.

Readers who think back, however - say, to this time last year - may be a bit sceptical when they recall the fuss made about business to consumer e-commerce and how "portals" were changing our world.

Peter Burridge, Oracle's Asia Pacific vice-president for exchange hubs, told the Business Herald there was a lot of hype about marketplaces.

"It may be media frenzy or organisations struggling with their e-business strategy, but people feel they need to get into consortia and say 'me too'," he said.

A lot of this buzz is being driven from the United States, where it is possible for a few large firms to generate the volume needed for an e-market.

"In Asia you can't do it in a single country."

Mr Burridge, who left Oracle Wellington for Singapore four years ago, said Oracle and PricewaterhouseCoopers had prepared a business plan for a horizontal MRO (maintenance, repairs and operations) exchange in Singapore to allow firms to do their indirect buying of items such as stationery and consumables.

"We worked out it doesn't pay - you can't make it profitable. But there are already four or five of these things being built up there."

He said the pioneer marketplaces were experimenting with business models.

"They all want to grab any other piece of revenue - application hosting, content management, anything they can get revenue from - because they know clipping the ticket on trades isn't going to make them money on today's transaction volumes."

That is not to say marketplaces cannot succeed. Oracle is involved with a German start-up company that created an exchange for hospital supplies, signing up 500 hospitals in Germany and another 750 in Asia.

"The company had bought oil contracts before the oil price hit, and it has been doing seller auctions of heating oil on this e-market, which has proved the whole e-market will work."

Mr Burridge said Oracle recognised that as there would be competing e-markets and e-markets serving different niches, customers were interested in how the diverse elements in the electronic marketplace could be tied together.

While market-makers could not use Oracle's transaction tools, they could use its databases.

He said New Zealand firms needed to be plugged into the "metamarkets" being developed in Asia "because the land grab's on."

"There's a chance now to form partnerships with companies they've had to traditionally knock on the door to."

Rather than spend money building their own exchanges, companies should work on content - putting their catalogues into formats that could quickly plug into marketplaces.

"There's a big difference between content you dump out in electronic form and catalogue content you can trade with, which is properly transformed and categorised."

Mr Burridge said companies risked missing out on opportunities such as the Singapore catering exchange that provided food - chickens from China, carrots from Brazil - for many of the airlines flying out of Changi Airport.

"The ability to have New Zealand cheese or butter on those planes comes down to whether suppliers load content on to that site - as simple as that."

Herald Online feature: e-commerce summit

Official e-commerce summit website