After the Boom: Evolution, Not Revolution

The "2006 e-Procurement Benchmark Report" released earlier this year by CAPS Research showed that of 195 organizations surveyed on their adoption and usage of e-procurement tools, just 17 percent were using e-marketplaces or exchanges. "It is interesting to note this," CAPS writes, "as the use of marketplaces was once touted as the next wave of e-commerce."

That figure, low as it was, did not entirely surprise me when I read it last month while researching an article on e-marketplaces for this issue (" e-Marketplaces 2.0"). Earlier in October, while moderating a session of the ProcureCon conference put on by Worldwide Business Research in Scottsdale, Ariz., I had asked a roomful of senior procurement, sourcing and supply chain executives from a range of industries how many of them were using e-marketplaces. No one would own up to using one of the sites.

One reason for this lack of open enthusiasm for e-marketplaces no doubt is that many companies felt "burned" after the dot-com bubble popped back in 2000-2001. "Those of us who hung around the marketplace space had to fight our way through because the whole business got a tarnished reputation from some of the people that were not in it for the best interests of the industry but were in it for the best interests of the venture capitalists they were serving," Mitch Free, founder and CEO of e-marketplace MFG.com, told me in an interview for the e-marketplaces article.

And yet a goodly number of e-marketplaces, including MFG.com, are still plugging away today, long after the dot-com boom went to bust. Besides the other e-players mentioned in this issue's article — including Enporion, GT Nexus, Quadrem and Xign — the e-marketplace space includes such companies as cc-hubwoo, Exostar, Global Healthcare Exchange (GHX), IBX and SynerTrade, according to a study, "The 2006 eProcurement Benchmark Report: Doing More with Less," put out by AberdeenGroup last July.

Many of the e-marketplaces have survived by expanding the scope of their offerings beyond their initial procurement-focused applications. Many don't even call themselves an e-marketplace anymore. "We've stopped using that term," George Gordon, chairman and CEO of Enporion, told me. Enporion now describes itself as a supply chain software developments and services company.

On the customer side, early adopters have found innovative ways to use the types of information that e-marketplaces can provide. Clients of GT Nexus, for example, have learned to use the kind of supply chain visibility information that the logistics network can provide as part of their inventory management process, turning shipment tracking data into a supply forecast that warehouse managers can use when scheduling labor resources to handle incoming goods. Elsewhere, Quadrem users can take advantage of supply chain finance services that leverage the vast flow of data — purchase orders, order responses, goods receipt vouchers, invoices — running through the e-marketplace's network.

The bottom line is that while many in the market may have written off e-marketplaces long ago, in reality the Net markets have been slowly and surely proving their worth over the past five years. True, we aren't likely to see anything like a second boom in the e-marketplace space, but we are likely to see steady growth as more and more supply chain executives recognize the expanding value that the e-marketplaces are able to offer. Are you finding value in using an e-marketplace? Do you have a favorite e-marketplace that you can't live without? We'd like to hear your story. As always, please feel free to send your thoughts to me at areese@sdcexec.com. I'll look forward to hearing from you.

Andrew K. Reese, Editor, Supply & Demand Chain Executive

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