2. Business-to-Business Ecommerce Robert Chi

3. B2B EC - 2 B2B EC Introduction Introduction Size of B2B B2B Business Processes B2B Evolution

4. B2B EC - 3 B2B Definition B2B is referring to business-to-business commerce conducted over the Internet. The primary components of the B2B marketplace include e·frastructure and e·markets. E·frastructure is essential architecture of B2B consisting of: –auction solutions software, –content management software, and –Web-based commerce enablers. E·markets are Web sites where buyers and sellers come together to: –communicate, –exchange ideas, –advertise, –bid in auctions, –conduct transactions, and –coordinate inventory and fulfillment.

5. B2B EC - 4 B2B Size CAGR: Compound Annual Growth Rate

6. B2B EC - 5 B2B E-Commerce Revenues http://www.tradeum.com/pages/frset-3forum_white.html

7. B2B EC - 6

8. B2B EC - 7 Global B2B Market Opportunity. That’s Thousands of Billions.

9. B2B EC - 8 B2B eCommerce Introduces Powerful Benefits to Both Buyers and Sellers Lower transaction costs Shorter purchasing cycles Improve inventory control Lower prices paid or higher price sold

10. B2B EC - 9

11. B2B EC - 10 What Is Behind B2C? B2B

12. B2B EC - 11 B2C vs. B2B B2CB2B Switching Costs Low with multiple suppliers High when integrated with e- frastructure; few qualified suppliers Relationship Type Transactional Long term, mission critical Transaction Type Smaller average selling price Larger average selling price Revenue Model Traffic volume is critical; Large customer base is key Don’t need every customer, only need the right customers

13. B2B EC - 12 B2B Markets Are Truly Global Multi-lingual, multi-currency Cross-border financing, taxation, customs, regulations Complex shipping and logistics

14. B2B EC - 13 B2B Business Models Seller-side: Direct-sell Buyer-side: eProcurement Vertical vs. Horizontal B2B marketplace B2B consortia Case studies

15. B2B EC - 14 Business Models Based on the Value Chain in the Market Place Raw material producer Manufacturer Distributor Retailer Consumer Exchange Examples: B2B: Vericalnet.com B2C: Amazon.com C2B: Priceline.com C2C: eBay.com C2B B2C C2C New Middleman Independent market operators Consortia Service Providers: Logistics Financial

16. B2B EC - 15 Business Models: Multiple Dimensions Buy-sell direction: Buyer-side, seller side, and marketplace Industry covered: single vs. multiple (Vertical vs. Horizontal) Ownership: Buyer, seller, independent, software vendor, consortia Service: Core vs. extended services Products: Core vs. MRO; Direct vs. Indirect; Pricing: Fixed price, Auction, Reversed auction, negotiated Timing of purchase: Contact vs. spot vs. ad hoc

17. B2B EC - 16 Number of Sellers and Buyers

18. B2B EC - 17 Features of Various Business Models

19. B2B EC - 18 Seller Side B2B

20. B2B EC - 19 First Generation Model: Sell-side Solutions Benefits –Reduced cost of sale –Extended customer reach –Enhanced customer service Challenges –Buyers must find individual suppliers –Supplier’s process does not match buyer’s purchasing procedures –Buying power lost Buyer Supplier

21. B2B EC - 20

22. B2B EC - 21 Direct Sales Selling Directly to Buyers from Own Website Examples: Dell, Cisco

23. B2B EC - 22 Dell.com

24. B2B EC - 23 Dell

25. B2B EC - 24 Dell Implementing a B2B integration model offers a number of advantages, many of which were deciding factors in Dell’ s decision to pursue a B2B integration strategy: –Fewer errors. –Improved customer satisfaction and support. –Improved inventory management. –Reduced time to market. –Improved manufacturer-distributor coordination. –Better outsourcing coordination. –Improved order management. –Tighter links with logistics providers. –Better delivery of information required for planning and forecasting. –Value-add for customers.

26. B2B EC - 25 Cisco’s Business Web Source: Digital Capital

27. B2B EC - 26 Cisco Systems Case Study: Winning With the Force of TechnologyCisco Gross Margin 64.8% 90% of orders booked over Web Enhanced supply forecasting - better component pricing and availability Enhanced demand forecasting - rapid shift to regional demand changes Outsourced manufacturing (build to order) “Virtual Close” - updates accounting on a daily basis Industry Peers 47.6% Just starting to adopt Web sales Longer lead times due to component shortages Slow to react to demand shifts In-house manufacturing (beginning to sell off manufacturing operations) Accounting updated weekly or bi-weekly Note: Industry peers comprised of COMS, JNPR, LU and NT

28. B2B EC - 27 Buyer-Side B2B

29. B2B EC - 28 Buyer Supplier Buy-side Solutions Benefits –Reduced purchasing costs –Buying power is captured Challenges –Supplier has to conform to buyer purchasing procedures –Only affordable by large companies

30. B2B EC - 29

31. B2B EC - 30 General Purchasing Process

32. B2B EC - 31 Buy-Side Solution-Enabled Purchasing Process

33. B2B EC - 32 Functionality of the Marketplace

34. B2B EC - 33

35. B2B EC - 34 The Cost Savings Created by Buy-Side Solutions

36. B2B EC - 35 Division of Corporate Spending (Typical Manufacturer)

37. B2B EC - 36 Buying Activities and Suitable E-Procurement Solutions

38. B2B EC - 37

39. B2B EC - 38 Selected eMarketplaces Powered by eProcurement Vendors

40. B2B EC - 39 Ariba.com and Ariba Network

41. B2B EC - 40 Marketplace

42. B2B EC - 41 Overlapping Models Address the Unique Dynamics of Each Market

43. B2B EC - 42 Net Markets Many Buyers Many Sellers One Marketplace Examples: Chemdex, VerticalNet, Altra NMM Buyer Supplier

44. Auction eBay Approach One Seller, Multiple Bidders Prices Move up Only Surplus Equipment, Inventory Dovebid Examplewww.dovebid.com

46. Dovebid www.dovebid.com Used Capital Equipment Click and Mortar Spin-off Bidders– Contact Sellers; Warrantees Can Touch the Merchandise Auction Example

47. Exchange Nasdaq-style Bid/ask Prices Move Up and Down Best for Commodities, Perishables Example: Altra Energy

48. Exchange Example Altra Energy www.altra.com Natural Gas, Electricity, Crude Oil Grand-daddy Site Bought Energy Brokerages

50. B2B EC - 49 Critical Success Factors for e·markets Sustainable Business Model Market Size (Large addressable market size) Industry Domain Expertise Structural Inertia: Fragmentation and technology adoption maturity in the industry First Mover Advantage - “land grab” Branding Community Features Technology Blending Revenue Streams Management Execution Hustle & Expertise Strong Partnerships for Distribution & Logistics Neutrality: Neutrality has quickly become the “First Commandment” of B2B markets. Liquidity: The “holy grail” for every market maker, they must build a critical mass (large number) of buyers and suppliers. No much behavior change and adoption “spark”. Going Public (if ready): Provides them with highly valued currency to quickly grow their businesses through acquisition.