Business revolution

10 July 2000 00:00  [Source: ICB]

Net markets are becoming big business for their creators and their customers, bringing together buyers and sellers from across the globe to trade in real time

The success of Internet companies such as e-STEEL and ChemUnity symbolises more than the fundamental changes occurring in business models credited to the Internet. It also reflects the fact that, increasingly, innovative startup companies and spin-offs are turning to an entirely new market model - the Net market.

Net markets are Internet-based marketplaces that create business-to-business (B2B) efficiencies, and associated value-added services such as information, trading and infrastructure.

Although there are many different Net market models, they share certain characteristics. Most Net market models can be characterised as one of four different variations: catalogue, aggregator/ community, auction and exchange.

Success

To be successful, each model must show a clearly identifiable benefit for buyers and sellers to attract enough of both to drive liquidity.

With 40 Net market accounts to date, e-marketplace builder Computer Sciences Corporation (CSC) has established unrivalled prominence in its design, technology, architecture and security. The company has not only helped to develop successful Net markets, but has created thought leadership and a sense of community among Net market makers.

CSC-led initiatives are advancing the technologies required to support large-scale, B2B e-commerce. The importance of attaining this market leadership cannot be understated in a business with high stakes and even higher potential. Banking and securities trading and brokerage company Bear Stearns estimates that, by 2003, online Net markets will transact $438bn in goods and services in e-commerce annually, generating $57bn in savings for participants.

'The fastest-growing of the new Internet market models is the business-to-business exchange that brings together multiple buyers and sellers from across the globe to trade in real time with dynamic pricing,' says Mike Klaus, a vice president who oversees e-business initiatives for CSC's Consulting Group.

'CSC is uniquely positioned to offer both front-end user experience services, and back-end systems integration services, to help a Net market maker win the critical battle for liquidity in its industry,' he explains.

Building on thought leadership

e-STEEL was the first success in CSC's history as a pioneer in the development and launch of Net markets. The company's clients now include industries as diverse as chemicals, real estate, steel, textiles, plastics and, surprisingly, fruit.

CSC has done more than simply help develop successful Net markets, however. The company has created thought leadership and a sense of community among Net market makers. In addition, it has been at the forefront in leading and supporting industry initiatives aimed at furthering the technologies and standards required to support large-scale, B2B e-commerce.

For example, the company is collaborating with CommerceNet - the world's largest independent consortium of e-commerce users, providers and developers - to develop the eCo Interoperability Framework Specification, which builds bridges between disparate, proprietary e-commerce solutions and extensible mark-up language (XML) formats.

In May 1998, CSC founded Ontology.org, an independent research organisation committed to improving XML practices through the adoption of knowledge engineering techniques and shared ontologies. In addition, CSC is a premier sponsor and participant in the Net Market Makers Conference. Net Market Makers provides information, analysis, resources and connections to people who build and grow Net markets, as well as to the broader community of investors and technology providers that fuel this growth.

Market leadership

Mike Beebe, president of CSC's Consulting Group, said: 'CSC's work with some of the leading Net market sites on the web, such as e-STEEL and ChemUnity, has given us unparalleled experience and expertise in this important emerging channel. We have clearly established a leadership position in the net market arena.'

Unlike most of its competitors, CSC offers the full scope of services, including strategy, systems design and implementation, that scale with the success of clients and their need for ongoing support. This ability to deliver end-to-end service sets CSC further apart from its competition.

'Creating effective B2B solutions requires a strategic point of view, as well as an in-depth understanding of back-office operations,' says Beebe. 'It requires someone with the ability to then bring everything back to the front to define the blueprint needed to implement our client's vision. I can't think of a company more qualified than CSC to do that.' With its 40 net market accounts to date, CSC has established a rich legacy of experience in Net market design, technology, architecture and security.

Merrill Lynch predicts that B2B e-commerce will grow from $158bn in 1999 to about $2 500bn by 2003. Of this amount, analysts estimate that around $400-500bn will be generated by third-party B2B Net markets.

As CSC continues to expand its involvement in the fast-growing Net market arena, its first success story - e-STEEL - remains a strong and solid partner. CSC helped e-STEEL chief executive officer Michael Levin realise his dream of creating an efficient and effective electronic marketplace for the trading of steel.

Christopher Hanan, e-STEEL director of business development agrees, saying: 'CSC had the broad range of skills we needed to fulfil our vision. Its in-depth expertise in managing large-scale enterprisewide IT projects, coupled with experience in e-commerce development, value-chain integration and Web services, has proven invaluable to us in making the e-STEEL online exchange successful.'

Innovation

CSC continues to build on its impressive history in Net market innovation, continually expanding its client base and widening its industry scope. Some recent additions include:

• BenefitMall.com - a successful online marketplace for small-business employee benefits. CSC is aiding the rapid deployment of the company's technology, as well as the national expansion of the BenefitMall.com concept by enhancing its e-commerce web site: (http://BenefitMall.com). Enhancements include equipping the site to handle significant growth in the volume of new carrier plans. BenefitMall.com has found that combining the power of the Internet with personalised service makes brokers more competitive and valuable - instead of irrelevant - to the selling process.
  
  
• E-Greenbiz.com - a neutral electronic marketplace matching buyers and sellers in the $100bn landscaping and nursery industry. Using BroadVision's one-to-one Business Commerce solution, CSC is helping to design, develop and deploy the e-Greenbiz.com site. The exchange launched the first version (www.e-greenbiz.com) in January.
  
  
• Generated Materials Recovery (GMR) - a broker of secondary plastic commodities. CSC is helping GMR to define a business strategy and identify technology platforms that will enable GMR to streamline the marketing and procurement of materials. The exchange, called 20tons.com, is scheduled for launch in mid-2000. It will allow buyers and sellers to interact more efficiently, improving existing relationships while instantaneously reaching a worldwide market.
  
  
• CSC has also been instrumental in helping ChemUnity.com to establish its unique business model for trading full truck loads of chemical commodities.

Mark-Jan Terwindt, chief financial officer of ChemUnity.com, said: 'CSC helped us through the difficult phases we encountered in setting up our web site - it was a huge challenge for them and they found innovative solutions to our problems.'

Four variations of net models

A Net market model can be characterised as one of four different variations:

• Catalogue - sites that post and update hundreds of catalogues from competitors for comparison shopping.
  
  
• Aggregator/community - sites that present multiple information feeds about specific industries and subjects in an integrated manner.
  
  
• Auction - sites that allow buyers to request bids and sellers to bid in return; some let buyers tender for the auctioned product.
  
  
• Exchange - sites that allow buyers and sellers to bid for, and auction, commodity products. Some are trading exchanges handling spot-trading of bulk commodities.

Source: InternetWeek

Characteristics of net markets

Net markets enable users to:

• Create a new revenue model.
  
  
• Have multiple buyers and sellers.
  
  
• Need a strong community to be successful.
  
  
• Can be vertical or horizontal, leveraging domains of knowledge.
  
  
• Enable dynamic pricing
  
  
• Developed by Net market makers, which are often startups or spin-offs of global 2000 companies.

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