When NetMarketing last looked at business-to-business electronic-commerce software, in July, many readers at small b-to-b suppliers got a bad case of sticker shock.
That's because software mentioned in our chart --from companies including IBM Corp., Armonk, N.Y.; Open Market, Cambridge, Mass.; and Trade'Ex, Tampa, Fla. -- carried price tags of $80,000 to $125,000, not including the cost of building systems with them.
The bad news is prices haven't come down, and at least two new categories of software -- "purchasing portal" and "partner relationship management" -- have emerged to challenge buyers.
The good news for small b-to-b suppliers is they can now get help from some of their best customers in implementing a software system. That's because folks in the selling and buying chain are working to give suppliers access to the software they're using, because they will save in terms of cost and they'll be able to bind the suppliers closer to them.
Krista Fairbairn, group product manager for Trilogy Software, Austin, Texas, said her company's Buying Chain 2.0 represents a new stage in the integration of suppliers with their big b-to-b customers.
"What companies were doing before Buying Chain," she said, "was building Web sites [for each customer]. They found they had to do customization, so they built extranets or premier sites for big customers." But costs were still high.
Now, companies such as Barnes & Noble and Sabre Group are giving Buying Chain to their b-to-b suppliers to control that customization, Ms. Fairbairn said.
"It lets them do approvals, reporting and other things," such as negotiated discounts and open orders, in a single, integrated system, she said. "Suppliers will offer discounts to Buying Chain users," and version 2.0 lets them integrate each customer into their own Web sites in less than a day.
Buying Chain is called a purchasing portal because unlike business-to-consumer e-commerce software, it supports negotiated terms, open orders, electronic data interchange and management approvals on purchases.
Within this area, Buying Chain is an exception, in that it's offered at a fixed price: $995 for 50 users.
Most business-to-business e-commerce software is offered through "value pricing," said Vern Keenan, Internet analyst at Keenan Vision, a San Francisco-based market research company. "You can present a case for saving tens of millions of dollars" for a multibillion-dollar customer, he said, and take a portion of those savings.
He calls the new software "e-procurement" tools.
On the selling side, b-to-b buyers in sales channels need information as much as they need transaction support. This need has driven a new category of products called partner relationship management software.
Among suppliers of this software are Webridge, Portland, Ore.; Allegis Corp., San Francisco; Partnerware Technologies, Austin; and ChannelWave, Cambridge, Mass.
Gary Whitney, VP-marketing at Webridge, said one of his manufacturing customers studied 1,000 partners and found that 25% of their selling time was wasted.
"We have a return-on-investment calculator for customers, which shows not only the cost savings, but the potential revenue if you make partners more effective," he said. "Even smaller organizations can see 5% revenue increases, and an equal cost savings, from deploying a solution like this."
For Alycia Maier-Turner, manager of electronic communications at Exabyte Corp., Boulder, Colo., delivering information to the channel is as vital as bringing in sales. She turned to Webridge's Mainspan to deliver it.
"We want to provide resellers, distributors and other partners with a communications vehicle they can access 24 hours a day, seven days a week, with information they need to close a sale, check an order, find out about products and work on leads," she said.
Mainspan costs $200,000 to $500,000, including installation, for 500 users.
Because distributors need to sell what they have before they can buy new stuff, moving information is even more important than transaction support in the e-commerce initiative at companies like In Focus Systems, Wilsonville, Ore.
Rogene Benz, information technology manager for front-end applications at In Focus, said, "We're trying to automate a lot of manual processes," including updating prices, using Mainspan.
Transaction processing comes next. "Next quarter we'll try to get our channel partners on automatic ordering through the Web," integrating Mainspan with In Focus' Oracle database.
Larger vendors, such as IBM, are also beginning to recognize the unique properties of b-to-b and to account for them in their distribution.
Dave Liederbach, director of marketing for e-commerce in IBM's software solutions division, said his largest b-to-b customers will give the company's new Catalog Architect software the features it needs to do well in the b-to-b space. That is, IBM's resellers will enhance the software, then sell it and the service for it.
"We're providing targeted solutions to discrete market segments," Mr. Liederbach said, through more than 1,000 resellers and software developers, allowing IBM customers to do business the way they're already doing business.
"Customers need to build their databases with relationships in mind," he said.
Catalog Architect costs $3,000 but is bundled into IBM's $19,995 Net.Commerce offering.
The complexity of b-to-b purchasing is also driving the efforts of large b-to-b distributors to integrate their software more deeply into the systems of the business from which they buy and sell.
Companies such as ProcureNet, Pittsburgh, which was spun out of Hampton, N.H.-based distributor Fisher Scientific Co. on March 30, and OrderZone, a joint venture of six major distributors spearheaded by W.W. Grainger, Lincolnshire, Ill., also aim to automate b-to-b commerce for small buyers and sellers.
"Our model has changed," said David Sloat, a ProcureNet product marketing manager. "We allow you to buy from small suppliers from our own catalog, [but it's] the ability to offer a complete solution that will bring customers."
Intranet spending frenzy
By extending e-commerce capabilities into b-to-b intranets, software companies are merely following demand.
International Data Corp., the Framingham, Mass.-based market research company, said U.S. businesses are engaged in an intranet "spending frenzy" amounting to $85 billion this year, and likely more than $203 billion in 2002.
"The current software solutions are going after the cream: big manufacturers," said Joan-Carol Brigham, research manager-Internet in the Frisco, Colo., office of IDC. "They can afford a $1 million solution."
But smaller companies will be able to buy software, too, if they are patient.
"Once they [software suppliers] get the cream and need to go to skim milk, they'll drop the price," Ms. Brigham said.