Rick Holden knows at least a third of his business is going to come through Net marketplaces in the next few years. He just doesn't know which third, nor which of the 10 or so markets in his industry will, in the end, survive.
There's no doubt the proliferation of Net marketplaces is making life tough for suppliers. Not only do they have to figure out how to affordably connect up with them, they desperately need tools to help determine which marketplaces are potential gold mines and which are money pits. New technology is emerging to help suppliers make a more measured leap into Net marketplaces. These "sell-side" exchanges let suppliers more easily connect to and evaluate multiple buying hubs.
Holden, the CEO of school supplies vendor J.L. Hammet Co., turned to server vendor Ironside Technologies to craft a technology solution that lets Hammet quickly and affordably turn on and off links to various Net markets.
Several years ago, Holden set up an Internet ordering system for J.L. Hammet's Web site at great expense; this time, he wanted a different approach.
"I'm not going to go through all of this time and expense every time we have to hook up with a marketplace," he said. "Let's get a standard here, give us some tools and a
methodology to hook up to any exchange we want."
"We have been saying for some time that sell-side e-commerce was about how your customers wanted to receive the information," said Bob Parker, e-commerce analyst with AMR Research. "This meant that product information not only had to be delivered to the Web site but to aggregators, exchanges and customers' buying systems."
It's not easy delivering product information so broadly. J.L. Hammet has been teaming up with exchanges "in stealth mode" since last summer, and is now linked with Epylon.com, Simplexis.com and Eschoolmall.com, and will soon go live on the Ariba Network.
Helping it make all these connections is Ironside, which recently released the Ironside Network. The platform lets sellers participate in markets without worrying about transaction standards and connection protocols.
Ironside COO Derek Smyth notes that about 50 new marketplaces are launching every week.
"Suppliers are looking at that and they're not sure how to deal with that type of growth. They are also uncertain as to what the business benefits are in participating in an exchange," Smyth said. "But the reality is, marketplaces are emerging and suppliers are at risk. They better figure out a way to credibly and quickly participate on these exchanges."
Ironside hopes to cash in with a transaction-based pricing model that charges sellers $500 per month per exchange they integrate with, plus $1 per supplier transaction that flows through the exchange.
That model mirrors what companies such as Ariba and Commerce One are charging on the buy-side of the exchange equation.
Joining Ironside in playing the sell-side of the exchange equation this month were Haht Software, which announced Haht SellSide Links, and Sellside Exchange, which helps sellers integrate with Net marketplaces. Haht, too, will price its software on a subscription basis.
The profit motive
Perhaps even more interesting is Maxager Technology, which is not focused on integrating suppliers with exchanges but rather on helping them determine if doing business on a particular exchange or auction will be profitable.
Maxager's software was originally used to help manufacturers uncover unrealized profits within their plants by shifting around product runs. But the platform can work its magic for e-marketplaces as well, said Maxager CEO Michael Rothschild.
Maxager's patented pricing technology calculates the per-minute--rather than per-unit--profit on any product, taking into account a wide variety of supply chain information. "We tell sellers when to leap on a deal," Rothschild said.
Net markets are going to have to keep suppliers as happy as buyers if they are to flourish.
"The hosts of these exchanges have come to the realization that they're doing OK if they can get buyers to flock to their sites. But there are two sides to every transaction," said Rothschild. "Sellers are not coming to markets today except in the most tentative fashion."
Suppliers fear their margins will get squashed and their strategic relationships minimized if they participate in buyer-driven hubs. "They want to play the game, but they don't want to die," Rothschild said.
Maxager has made deals with E-Steel.com, SupplierMarket.com and MaterialNet.com to market its platform to suppliers on their exchanges.
Analysts see a bright future for sell-side exchanges and other supplier-centric tools.
"There will absolutely be a market for off-the-shelf solutions to help suppliers work with exchanges," said Dan Sholler of Meta Group.