B2B marketplaces face shakeup

The great e-marketplace shakeout has begun and by 2005 the business-to-business (B2B) world will be reduced to just three business models - business services, commodities and integration services.

That is the opinion of research company Gartner, which said in a report this week that services exchanges will succeed by offering value-added supply chain services such as financing options for purchases, as well as fulfilment and delivery services. This will result in cost reductions for buyers and sellers, adds the researcher.

Commodities exchanges will eliminate markets that display asymmetric information, inefficient spot markets and excess product auctions. In their place will be sites for speculation on product and service commodities, and futures that will provide more successful sales and capacity management.

Integration services exchanges will converge marketplace, application software and application services provider models, and focus on trade entity and process-definition integration to simplify system integration.

Gartner bases its opinions on evolving market trends such as the competition from brick and mortar companies, and the increasing lack of B2B venture capital. The researcher also suggests that companies should avoid tackling all three B2B models and instead focus on one.

"To survive, e-marketplaces must overcome increased operating costs and provide an extremely compelling reason for moving tightly integrated business processes to a marketplace," said Gartner research director Carl Lenz.

"Marketplace functionality and participation are currently limited, but by 2005 more than 500,000 companies will participate in marketplaces as buyers or sellers, or both," he added.

However, Global 2000 companies will see less than 15 per cent of all procurement performed through marketplaces by 2005, according to Gartner.