The Envelope, Please ...

AMR Research names winners in the exchange category

Boston  April 19, 2001  Independent trading exchanges have struggled for acceptance for quite some time now. Industry consortiums are hitting resistance and, worse, indifference, as they try and meet the lofty expectations they set for their sponsors. But without a struggle, there can be no progress, and some are rising above the rest. The 2001 AMR Research Survey, Top Trading Exchange Services for Industry Verticals, identified the leading trading exchange services within 10 specific verticals, which have ridden out the storm of corporate skepticism, economic downturn and investor flight. These services have shown that they can survive but can also create value for companies within their industry, the final litmus test for acceptance by users.

"Users are recognizing the value of industry-focused exchanges, which are closest to successfully delivering on promises made a year ago," said Joan Harbin, research director, B2B Marketplaces Practice. "Niche trading exchanges are delivering real value by digging deep into industry-specific business processes that impact revenue creation and cost containment."

Survey Highlights
AMR Research reviewed the leading vertically focused trading exchanges from more than 1,400 survey recipients. The firm's criteria included consistency of strategic vision, depth of industry expertise, the exchange's ability to create liquidity, and level of functionality. Key results included:

  • Trading exchanges are offering technology and services to build liquidity. Even companies engaged with various public exchanges are building their own private trading exchanges (PTXs) to provide a single integration point for B2B commerce and to support specific business objectives.

  • The surest path to liquidity is to streamline current business processes.

  • 2001 is a make or break year for industry consortiums.

  • Along with technology, trading exchanges need to provide management consulting to help users optimize use of these exchanges.

Industry Leaders
AMR Research identified these leading trading exchanges within 10 specific industries:

Aerospace and Defense: Exostar
BAE Systems, Boeing, Lockheed Martin Corp., and Raytheon founded the exchange, which is making notable progress toward their collective vision of becoming the collaborative hub for aerospace.

Automotive & Heavy Equipment: Covisint
With the solid backing of Ford, General Motors, and DaimlerChrysler, no other exchange comes close to having as much influence in the industry.

Chemical and Plastics: Chematch
Hard-charging and aggressively pursuing dominance of the chemicals commodity market, Chematch, with a billion plus dollars of trade in 2000, is one of the most successful e-commerce ventures in any industry.

Consumer Products: Transora
Transora has $250 million of investment and 55 members. This consortium was born with a silver spoon in its mouth, and it is up to management to win or lose.

High-Tech and Electronics: Converge
Converge has a good shared services model with a strong combination of online and offline services, and the purchase of NECX has given it a brick-and-mortar service component.

Metals: e-Steel
Accenture is forecasting that 40 to 60 percent of metal worldwide will be sold over the Internet by 2005, and e-Steel is best positioned to capitalize on the opportunity. Besides driving revenues through commodity trades, the exchange has led the march toward offering exchange services for private trading communities.

Oil &Gas: FuelQuest*
FuelQuest is wisely targeting a market below the radar of the large oil and gas. companies.

Paper: PaperExchange
With a 20-fold volume increase along with a 575 percent increase in transactions for 2000, the first exchange for buyers and sellers of pulp and paper has seen impressive growth and is established worldwide.

Retail: GlobalNetExchange (GNX)
Founded by a who's who in retail and in a highly segmented industry, GNX is well on its way to delivering support for collaborative commerce.

Utilities: Altra Energy Technologies
Profitable, self-sustaining and growing at a rapid rate, with more than $1B of transactions a month, Altra is working hard on integrating to back-office systems.

No single exchange leads in all evaluation criteria; some are stronger in domain expertise than others. These exchanges are still evolving, changing business models, and forming partnerships to extend into new markets or address more business processes.

* At the time of printing, Fuel Quest was included in the industry leaders, the company has now currently changed their business model to that of a technology provider.