Critical mass also creates standing and legitimacy in a market segment, says Greg Johnsen, co-founder and vice president of marketing at GT Nexus, an on-demand global logistics portal that has sometimes been thought of as an e-marketplace for shippers and their carriers. Johnsen says that his company's early win with a group of a dozen major ocean carriers — representing nearly 50 percent of world ocean capacity — helped give GT Nexus credibility in the logistics community and created a "network effect" that drew additional customers to the portal. "Once people saw a critical mass of companies engaging with our platform, they were more willing to get onto the platform themselves," Johnsen says.
Diving Deeper and Adding Value
Having built a sufficiently large community, the successful e-marketplaces have taken two additional steps that have helped lock in their customer base and, in doing so, create additional value for their users. First, they have worked to extend more deeply into the internal processes of their member buyers and suppliers. For example, Enporion, which started out in 2000 as an industry-sponsored procurement exchange to serve North American utilities and their partners, has recently been working with several customers on the settlements side of their businesses, extending into its customers' financial supply chains. "When you start getting into the internal workings of the settlement of the transaction, you become a real value-add to the customer, and the customer also becomes pretty dependent on you," says George Gordon, chairman and CEO of Enporion.
Finding new value-adds is the other way that successful e-marketplaces have managed to continue building their relationships with existing customers and draw new users. One way they are doing this, says Gartner's Wilson, is by becoming specialists at "onboarding" large numbers of suppliers — that is, helping a buying organization to electronically enable their supply base so that offline, manual transactions can move to an online, automated environment. Quadrem, for example, has become expert at leveraging a variety of technologies to connect its mining and metals industry customers' remote operations with suppliers that often operate with little more than a fax machine.
The successful e-marketplaces also are offering unique services or solutions that target their particular niche. In this respect, Wilson points to SciQuest, a spend management and procurement automation specialist that started out its life as a builder and operator of private marketplaces and supply chain solutions for research enterprises and their suppliers. "SciQuest has come up with some fascinating applications for helping companies manage their chemical stocks," Wilson says. "That has value within a fairly narrow range of companies in specific sectors, but for those particular customers, it keeps them coming to SciQuest for other things, too."
Another example: Xign, which operates an electronic B2B payment network, has developed a set of analytics that it can apply to its customers' payment transactions through the network, allowing the customers to benchmark their settlements performance across more than a dozen key performance indicators. "We have more than $100 billion in transaction history that we can now use to benchmark your performance against," says Tom Glassanos, Xign's president and CEO. "We can tell you exactly where you are and how to better use that information."
Building Value for the Future
Moving forward, Gartner's Lheureux says that the successful e-marketplaces will be those that can continue to take on additional bits and pieces of IT functionality and business processes that it no longer makes sense for an organization to manage internally. "Undifferentiated application functionality is going to continue to shift outside the organization, so the key for the e-marketplaces is to identify and take on that functionality," Lheureux says. Free, for example, says that MFG.com is looking to do this by adding productivity tools for suppliers, becoming a sort of on-demand enterprise resource planning system for job shops. On the buy side, the e-marketplace wants to add tools to help buyers manage their bills of materials.
Where do we stand now in the development cycle of e-marketplaces? "It's a bit like Churchill's speech," says Spears, with Quadrem. "We're at the end of the beginning. We've just started to cross over into the early majority stage of market adoption of these types of services. The challenges for our business going forward are going to stem from being able to move to significantly bigger volumes."