Las Vegas April 30, 2001 Experience, sophistication level and degree of integration are the three key variables driving return on investment (ROI) for companies selling into digital marketplaces and e-procurement systems, according to a new study by consulting firm Andersen and Blue Martini Software.
The survey found that more than one-third (36 percent) of suppliers say they already are receiving a positive ROI (46 percent ROI on average) from their ability to sell into digital marketplaces and e-procurement systems. The remaining two-thirds of suppliers expect to achieve a positive ROI within 20 months of their initial participation in these channels.
"The good news from this survey is that suppliers really are achieving the benefits revenue growth, new customers, lower cost of sales that have been promised to them," said Kevin Costello, Andersen's global managing partner of digital markets solutions. "Andersen believes one of the keys for executives is to be patient with the strategies that have been put into place. We all need to realize that digital marketplaces and e-procurement solutions are new channels, and it takes time for both buyers and sellers to become accustomed to utilizing new channels."
Of companies with more than a year of experience selling via digital marketplaces, nearly half (42 percent) say they realized ROI, compared to just 19 percent for companies with less than one year of experience. The survey also found that suppliers who have implemented leading-edge capabilities, such as "punch-out" or "round-trip" functionality, were almost twice as likely to realize ROI as companies with basic capabilities, such as flat file catalogs. Punch-out or round-trip functionality enables sellers to differentiate their products on digital marketplaces by linking prospective buyers back to the sellers site, where they can get product information, advice and context, and then with a click of a button, make the purchase in the digital marketplace.
"Marketplaces offer an opportunity for sellers to reach-out to new customers and streamline operations," said Monte Zweben, president and CEO of Blue Martini Software, provides customer-relationship management software for e-business applications. "However, to truly succeed, sellers must find ways to differentiate their products or face commoditization."
The study indicated that companies with a higher degree of integration between a marketplace and their internal business systems and processes, such as order entry and distribution, increased their ROI realization.
Conducted by KS&R and released at the Ariba Live! users conference in Las Vegas, the study involved interviews with executives at 152 companies currently selling through business-to-business e-commerce channels.
Other findings of the study included:
Digital marketplaces and e-procurement solutions create new customers and drive revenue growth. Nearly two-thirds of suppliers (62 percent) indicated generating new customers as a result of their participation in digital marketplaces and e-procurement solutions. More than half the respondents (52 percent) found incremental revenue growth (greater than 10 percent on average) from their participation.
Suppliers expect significant future growth. Respondents indicated they expect 30 percent annual average growth in the percent of overall revenues obtained via digital marketplaces and e-procurement channels over the next two years.
Multiple digital marketplace and e-procurement solutions top the list of barriers for participation. More than half of suppliers (53 percent) ranked working with multiple standards as the greatest barrier to achieving success with digital marketplace/e-procurement projects. "Suppliers find it difficult to support multiple marketplaces and e-procurement opportunities because each opportunity can be based on a different technology platform," said Costello. "Andersen works with companies to develop solutions that will help them navigate the technology challenges and achieve ROI and revenue growth in reduced timeframes."