As more business moves to the Internet--especially in e-marketplace environments--companies may know less about their new trading partners.
Whether it's a new supplier half-way around the globe, or a small, local upstart with a great new product or low price, buyers need to evaluate more sellers, more quickly, than ever before.
And traditional methods, such as jumping on a plane for a site visit or spending weeks checking references, just won't work for companies moving at Internet speed.
Trust issues are emerging as a major challenge to companies moving their b-to-b dealings online.
"Right now, the dirty little secret of Net marketplaces is that not a lot of transactions between new partners are taking place," said Stan Smith, president and CEO of OpenRatings.com, Boston, which has a supplier rating service for b-to-b transactions. "Mainly, it's because of trust issues. It's easy to bring old relationships online and automate them. It's much more challenging to forge new relationships in this environment."
Hal Loevy, VP-marketing of SGSonSite, Geneva, a global verification, testing and certification company, said that while companies are optimistic about online trading's growth, "many are expressing concerns about the fear of the unknown."
"The challenge is this: How do we answer questions about a seller with which a buyer has no pre-existing relationship? Who exactly am I doing business with? What is their trading history? Am I obeying the laws of the country of export? Will I receive the goods as to the specification on the computer screen?" said Loevy, a founding member of the Forum for Trust in Online Trade, a group plotting b-to-b trust standards.
The answer to this conundrum is beginning to emerge. Insiders call the solution "trust infrastructure." In plain terms, think of it as a set of technologies and e-business practices to help buyers evaluate suppliers, confirm their identity and make trusted transactions--all on the Web and as quickly and seamlessly as possible.
Many vendors are attacking this hot new area.
Trust infrastructure isn't something you buy out of the box. Rather, it's an array of technologies and services that you adapt to fit how your company does business. The pieces include:â¢Digital signature technology, which ensures the identity of a trading partner. â¢Ratings services that help buyers evaluate potential suppliers. â¢Sophisticated payment, risk management, insurance and inspection services that help companies handle the full complexity and mitigate the risk of b-to-b transactions.
"Trust is emerging as an important topic," said Tim Clark, an analyst with Jupiter Communications Inc., San Francisco.
"But it is one that Net markets [and their vendors] are only now beginning to address."
Security giant VeriSign Inc., for instance, has assembled a portfolio of b-to-b trust services, including e-signature tools and advanced payment gateways.
"The real Holy Grail here is spontaneous commerce, where buyers and sellers come together via an exchange, authenticate, negotiate, shake hands, consummate and settle a deal, all online," said Anil Pereira, VP-Internet services group for VeriSign.
President Clinton recently signed e-signature legislation into law, moving a key element of the trust infrastructure forward. E-signatures and related technologies are particularly important for b-to-b e-commerce because they help parties create a digitally stamped and sealed record of e-commerce interactions.
"The e-signature bill helps raise awareness and gives people confidence there isn't going to be some regulatory change down the road," Pereira said. Vendors such as AlphaTrust Corp. are taking e-signatures as a leaping-off point. In addition to supporting the technology, the Dallas-based vendor is creating more complete b-to-b contractual frameworks that can help move offline transactions online, said CEO Bill Brice.
AlphaTrust aims to make completing a b-to-b transaction as simple as a b-to-c credit card sale.
"On the Web, the credit card companies have enabled what has happened so far in b-to-c commerce," Brice said. "Our approach, modeled after the credit card providers, is to use our electronic signature service to become a party to a common legal contract framework for b-to-b transactions. In b-to-b, companies really do want a legal, valid and permanent paper trail."
AlphaTrust services establish the legality of an individual transaction, maintain data privacy, adjudicate disputes and offer risk protection of up to $250,000, Brice said.
"It's a big psychological change for people to move transactions online when they're used to dealing with paper," he said.
VeriSign and AlphaTrust are far from alone in tackling identity and payment challenges. For instance, Cyclone Commerce Inc., Scottsdale, is pitching digital signature services; while a slew of b-to-b payment enablers--such as Actrade Capital Inc., Somerset, N.J.; eCredit.com, Dedham, Mass.; and i-Escrow.com, Redwood Shores, Calif.--have developed payment systems fitted to complex b-to-b transactions.
i-Escrow.com, for instance, got its start backing person-to-person deals on auction sites such as eBay. But it found its technology may be even better suited for b-to-b transactions, said founder and CEO Sherman Kwok.
"When there's clearly no trust relationship already established, both sides in a transaction can rest assured that if the buyer pays then, thanks to the escrow service, they'll either get their product or their money back," Kwok said. "We definitely believe our service can help marketplaces accelerate the closing of more transactions online."
New ranking systems
Just as interesting are b-to-b ratings vendors, which are beginning to emerge with very sophisticated evaluation and ranking systems to help buyers get a better feel for unknown suppliers.
OpenRatings.com, for instance, detailed its ratings service last week. The company's ratings of suppliers take a wide array of data into account: evaluations by other buyers, past performance and most recent performance; plus basic data such as size of the company, years in existence, market share, credit ratings, and other historical, financial and business-related information.
"In b-to-c, companies purchase their business reputation by buying advertising. If a company is willing to spend enough on advertising, I'd be willing to do business with them," said OpenRatings' Smith.
B-to-b is a whole different ballgame. A bad deal with a supplier has "potentially catastrophic implications if a company doesn't live up to its promises, or a product or service simply doesn't show up," Smith said.
Newmediary.com, which acts as a b-to-b broker of professional services such as Web design and accounting for midsize companies, deployed the OpenRatings platform last week.
"It provides much better context for our buyers. It makes our site much more useful and utilitarian. For suppliers, they get a better understanding of how they are perceived in the marketplace," said Scott Cohen, Newmediary.com CEO.
GeoTrust plans to launch a similar ratings and trust service in August. GeoTrust CEO David Chen said such trust services soon will be a key part of all exchanges. "More mature exchanges are realizing this is not just nice to have. It's a necessary part of the marketplace infrastructure," he said.
In the end, exchange performance data and supplier ratings should be aggregated across multiple exchanges, Chen said. "Lots of exchanges think they are islands unto themselves. They don't realize that all of this is intermingled. No buyer or seller is going to do business with just one exchange," he said.
Topping the agenda
Experts say trust issues need to be at the top of the b-to-b marketer's agenda.
"Reputation management and reputational implementation will become the next job of the brand manager," Chen said.
"If you have a major-name producer doing business on an exchange, such as Dow Chemical, trust issues may not present any particular problem," said Loevy, of The Forum for Online Trust in Trade. "Recognition of their brand carries with it a degree of trust. But international trade is carried out to a large extent between small and medium-sized enterprises. Effectively bringing trust and confidence online for these companies will really level the playing field."
Loevy's group, which counts e-marketplaces Fasturn.com, MeetChina.com and PaperExchange.com among its members, will hold its first public conference in San Francisco in late September. Information can be found at www.thetrustforum.com.