Business-to-business (B2B) exchanges or marketplaces provide dramatic opportunities to automate collaborative business processes with customers and suppliers, generate internal efficiencies, and reach new markets at minimal cost. The landscape is littered with hundreds of B2B exchanges that have failed, demonstrating that success is far from automatic. But many are still operating. They have learned how to take advantage of the opportunities and avoid the pitfalls of this dynamic new marketing channel
B2B exchanges are online marketplaces for businesses to buy and sell good and services from other businesses. Automated business-to-business transactions are not an entirely new concept. Large organizations have been using automated systems for a number of years, and some have been programmed to exchange business transactions with other automated systems as far back as the early nineties. For example, a firm's Aircraft Engines division had a system with which a customer could order a part, initiate the shipping process, be invoiced, and pay for the part, all without a single piece of paper and within a span of 45 minutes. However, these systems needed dedicated, expensive data communication facilities and required significant investments in large, complex software to be developed from the ground up before they even started working. The Internet brought down the cost and the technological barriers.
The simpler business-to-consumer (B2C) model beat B2B to the punch in wide availability and visibility. Business based on the B2C model, in which the customer browses through an electronic catalog to select items for purchase, is well established at this time. Yet, the potential in terms of dollar volume and number of transactions, however, is far higher for B2B even than B2C. This is because a chain of transactions involving material suppliers and service providers lies behind every product that reaches the consumer. B2B transactions typically involve long, complex processes including searching for vendors, requests for quotation, evaluating different proposals, negotiation, supply chain planning, shared product design, document exchange, billing, payment and extensive data analysis. As a result, B2B exchanges can go far beyond simply streamlining buying and selling: They can create customer-driven value chains that substantially reduce costs for both buyer and seller, better align the entire supply chain with the customer's needs. They can also make it possible to enter new global markets at minimal cost and substantially reduce the time required to respond to changes in demand patterns.
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