Gearing up for the biggest virtual market yet

Business-to-business ecommerce took a massive leap forward last week with the announcement by General Motors (GM) and Ford Motor Company that they are to merge their individual trading hub developments and court other automotive manufacturers to join what will be the world's biggest virtual market.

German manufacturer DaimlerChrysler has already confirmed its commitment. The three rivals will each have equal ownership in the joint venture which will operate as a separate business in a striking example of 'co-opetition'.

"It is unprecedented for GM, Ford and Daimler to come together to form this type of joint venture," said Harold Kutner, vice president for GM worldwide purchasing.

"The power of this is better than anything we could do alone," added Ford vice president, Brian Kelley.

Open invitation
GM, Daimler and Ford are keen to expand the marketplace further and are inviting others to join them. To date, French car manufacturer Renault, and its Japanese affiliate Nissan, have indicated a positive response.

Many industry analysts predict that while in certain industries dominant trading hubs will emerge which will both compete with and be complemented by other sites, in other sectors this co-opetition model may prove totally inappropriate. Ohio-based supplier Dana has already announced plans to set up its own e-procurement system to manage its $8bn purchases.

Also, firms such as Peugeot, Citroen and Volkswagen, users of the European Network Exchange (ENX), an automotive purchasing and data exchange system, may be reluctant to switch standards.

But for Ford et al, the really big catch appears to have already slipped out of their reach. Ford and GM have been separately wooing Japanese firm Toyota Motor to participate in their individual hubs, but with little indication of success. Another blow came last week when Toyota revealed that it had formed a partnership with i2 Technologies to build an online service for the automotive parts industry.

The new marketplace, called iStarXchange, will be jointly owned by Toyota Motor Sales and i2 but will operate as an independent company. The iStarXchange will be recruiting participants such as automotive equipment makers, suppliers, wholesalers and independent installers.

United we stand ...
Remarkably, not only have these fiercely competitive car firms united for the greater good, there's also the prospect of rivals Oracle and CommerceOne having to grin and bear it as partners in the new initiative.

The two software suppliers were the main e-procurement technology providers for the Ford and GM projects respectively, and are deadly rivals on the B2B battlefield.

Quite how the new alliance will work in practice is uncertain, and it clearly took the suppliers by surprise. Bob Kimmitt, chief operating officer at CommerceOne, said: "We haven't worked out the actual integration yet, but the framework is in place and it will work for any exchange around the world."

Obviously there will be strains in the relationship: for example, quite how Oracle will react to Daimler's statement that it would like to see German firm SAP, Oracle's arch-enemy, provide some of the procurement software for the joint exchange, remains to be seen.

Embracing co-opetition
It's not just the big vehicle makers that are coming together over e-procurement. Last week, retail giant Sears and French retailer Carrefour announced plans to build an online marketplace to serve the retail industry. The resulting online market will link them to 50,000 suppliers, partners and distributors over the internet.

"I'm surprised," said Peter Loughlin, principal ecommerce consultant at KPMG Management Consulting. "Buying for retailers is absolutely core to what they do. To share insight and relationships seems unusual." Perhaps it's just that we're not quite ready to embrace co-opetition here.

While Sears and Carrefour are committed to attracting new retailers to their site, none has yet emerged. Perhaps predictably, Marks & Spencer said it has no plans to join. More significantly, the conspicuous absence of the world's largest retailer, Arizona-based Wal-Mart, begs obvious questions about GlobalnetXchange's ability to become the retail standard.

Wal-Mart will continue development of its own Retail Link supply chain collaboration system. In operation since 1991, it seems likely that UK arm Asda will adopt the system as well.

Difficult decisions
While Internet trade between bilateral partners will continue to flourish, multilateral e-marketplaces will grow much faster, reaching 53 per cent of all online business trade in five years, says Forrester Research. That means companies across all industries will face decisions about which of the multiplying hubs to back - and soon.

"There is nothing wrong with waiting to see which hub looks like winning," said Mike DiPietro, managing director at manufacturing software consultancy AMR Research. "But while businesses evaluate the sites, they should prepare their business processes to support their moves on to them."