Lecture 5: B2B Models and Services

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CS5038 The Electronic Society

• Lecture 5 B2B Models and Services
• Lecture Outline
• Concepts and Characteristics of B2B
• B2B Models
• Sell-Side Marketplaces One-to-Many
• Buy Side Marketplaces One-from-Many
• Exchanges
• Managing exchanges
• Services
• Hypermediation

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Concepts and Characteristics of B2B

• Companies attempt to automate trading to improve
  the process
• 2 types of marketplace
• Private e-marketplaceone-to-many mode
• Public e-marketplacemany-to-many mode (aka
  exchange)
• 2 types of transaction
• Spot buyingdetermined by dynamic supply and
  demand
• Supported by third party exchange
• Strategic sourcinglong term contracts
• Supported by efficient supply chain
• How is B2B conducted?
• Directly between buyer and seller
  (disintermediation) or via online intermediary
• Along the supply chain
• Raw material, manufacturer, distributor, retailer
• Benefits of B2B models
• Eliminate paper, Expedite cycle time, Reduce
  errors and costs
• Better partnership management
• Collaborative commerce companies share
  information e.g. to predict orders

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B2B Business Models

• Company-centric models
• Sell-side marketplace (one-to-many)
• Buy-side marketplace (many-to-one)
• Many-to-many marketplacesthe exchange (lecture
  6)
• Buyers and sellers meet to trade
• Other B2B models and services
• Helping to optimise the value chain
• Vertical vs. horizontal marketplaces
• Verticalone industry or industry section
  steel, chemicals
• Horizontalservice or product used in several
  industries
• Virtual service industries in B2B
• Travel and tourism services
• Real estate
• Electronic payments

• Online stock trading
• Online financing
• Other online services

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Sell-Side Marketplaces One-to-Many

• Three main methods
• Direct sales from catalogs
• Like B2C - Configuration and customisation
• Successful cases Dell, Intel, IBM, Cisco
• Selling via intermediaries
• Forward Auctions (highest bidder wins)
• Increases revenue, page views and membership
• Can be done on sellers site or through
  intermediary
• Intermediary services
• Search and report all auction activities
• Calculate billing and handle payment

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Buy Side One-from-Many, E-Procurement

• No equivalent in B2C
• Purchasing agents (buyers)
• Direct materials - Use material in manufacture
• Critical to keep production line running
• Usually involves long term relationship with
  vendor
• Indirect materials Maintenance, repairs,
  operations (MRO)
• 20 of cost but 80 of purchased items ? receive
  less attention
• Inefficiencies in procurement management for MROs
• Procurement reengineering automation save
  money reduce maverick buying - From non contract
  vendor
• Buy-Side marketplaces let the sellers do the
  work
• Reverse auctions (lowest bidder wins)
• Web based auctions are faster and cheaper
  lecture 6
• Aggregate suppliers catalogs on organisations
  server
• Group purchasing
• Internal aggregation quantity discounts less
  overhead e.g. GE
• External aggregation third party aggregates
  demand

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Exchanges

• Classification Direct Material Indirect MROs
• Systematic Sourcing Vertical Distributors Horizon
  tal Distributors
• Aggregation, fixed prices Aggregation, fixed
  prices
• Spot Sourcing Vertical Exchanges Horizontal
  Exchanges
• Matching, Dynamic Pricing Matching, Dynamic
  Pricing (Dynamic pricing different prices to
  different customers)
• Ownership
• Industry Giant IBMs patent exchange
  delphian.com
• Neutral Entrepreneur third party intermediary
  unbiased
• Liquidity ability to recruit large numbers of
  buyers/sellers
• Consortia several industry players no one
  dominates
• Purchasing oriented consortia group of buyers
  pressure sellers to lower prices
• Can also have selling oriented consortia
• Legal challenges anti-trust scrutiny e.g.
  industry pricing policies
• Warning signs price increases, reduced quality,
  denial of qualified parties
• Response less information transparency to
  inhibit access to competitors information,
  participation broadly available, neutral
  autonomous management

Also Purchasing oriented or selling oriented
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Managing Exchanges

• Revenue models
• Transaction fees commission on each sale
• Service fees - i.e. level of service
  consultancy on policy, phone calls etc.
• Membership fees annual or monthly
• Advertisement fees ads on the portal
• Critical Success factors
• Early liquidity leads to low transaction fees,
  increases liquidity
• Liquidity refers to volume of business conducted
• Businesss chance of survival is best when
  liquidity is achieved early
• Openness organisational and technological (open
  standards)
• Targeting right industries high product
  search/comparison costs
• Brand building is critical because switching
  costs are low
• Value added services industry news, hosting,
  financial services
• Exchanges team up with banks, logistic services
  and IT companies to help
• Multiple revenue streams from services ? lower
  fees

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Why Outsource B2B Services?

• Desire to concentrate on core business
• Need to have services up and running quickly
• Lack of expertise for support services
• Economy of scale not possible from inside
• In-house options do not meet changing demands
• Too many services for one company to handle

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B2B Services I

• Consulting Services for strategy technology
  (IBM)
• Application building services
• Licensed and incorporated in client system or
  real-time via ASP
• Industry standardsXML, XSL (extensible style
  language)
• Web Hosting and Other Services
• Business hosting - popular for SMEs
• Large businesses need a dedicated server
  dellhost.com
• Free Web hosting advertising revenue
• MSPs like ASPs but manage IT infrastructure
  (not applications)
• Directory services listings, search engines,
  matching services

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B2B Services II

• Order Fulfillment, Logistics, and Supply Chain
  Services
• supply chain management and transportation
  services e.g. UPS
• Marketing and advertising
• Ad server network provider brokers banner ad
  sales
• Electronic wholesalers intermediary who sells
  to businesses
• Infomediaries and Online Data Mining Services
• Collect consumer data ? analyse it ? repackage ?
  sell for marketing
• Clickstream data monitor users clicks
• Providing content
• Syndication knowledge creators use syndicators
  to distribute content
• For dynamic content E.g. news, sports, weather,
  stock quotes
• Cheaper than producing your own content
• Catalog content
• full service exchanges offer catalog services
• Content maximization and streaming services
• companies provide media rich content to reach
  target audience
• E.g. Video clips, Music, Flash media

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B2B Services III

• Financial B2B services
• Payment Systems
• Purchasing cards used by governments or
  universities geographical limits
• Electronic letters of credit (LC) can work
  internationally(payment upon presentation of
  documents that comply with terms)
• TradeCard.com cheaper than LCs uses
  MasterCards trusted brand
• Venture capital to fund EC initiatives VC firms
  and angel investors
• Internet incubators develop EC initiatives then
  move on
• Credit reporting firms
• Credit intermediaries guarantee against loss
• Reintermediation ? redefining value added role
  of traditional intermediaries ? new electronic
  intermediaries ? Cybermediation
• Hypermediation intermediaries flourishing

• Content providers
• Affiliate sites
• Search engines
• Portals

• ISPs
• Software makers
• Other entities in future

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Summary

• Concepts and Characteristics of B2B
• types of transaction, marketplace, conduct,
  benefits
• B2B Models company-centric, many-to-many
• Sell-Side Marketplaces One-to-Many
• Buy Side One-from-Many, E-Procurement
• Exchanges types, ownership, models
• Managing exchanges revenue, management, success
  factors
• Services outsourcing, Web hosting, financial,
  logistics, marketing, providing content,
  directories, newsletters.
• Hypermediation
• QUIZ 6