The idea behind the public e-marketplace was to create a huge electronic
meeting place where buyers and sellers could conduct business; vendors
could find new customers; buyers could find bargains; and the enviable
middleman takes a fee or a small percentage for every transaction.
Although this did work to some degree and plenty of public marketplaces
still populate the Internet, the initial vision and the eventual reality
never quite matched up. In hindsight, the reasons seem obvious now.

Such an e-marketplace has a certain amount of anonymity inherent in it,
which in many industries is not a good thing. Grif Palmer, Senior Vice
President of Business Development at SourceXL, describes the scenario:
"You're not interested in an anonymous universe of hundreds of vendors
coming to sell to you. You can't do business with them anyway. You have
to qualify them, you have to qualify their credit, their delivery, their
time in business." Obviously, this sort of due diligence isn't possible
in the free-for-all envisioned by early proponents of public
e-marketplaces. Also, the e-marketplace exhibits benefits in the context
of a private exchange, but "there's typically pretty large upfront
consulting fees and large licensed software fees, and deployment that
can take three to 12 months," said Palmer. "In this economic
environment, a lot of companies want to use a rapidly deployable
solution like we're offering, and see immediate ROI and a hard dollar
benefit." The private exchange still holds the promise of automation,
cost-savings, and much more, but it often comes with high costs and
complexity.

Palmer is, however, a strong advocate of private e-marketplaces and a
provider of the technology to make them happen. Operating as an ASP,
SourceXL (http://www.sourcexl.com) provides a vertical private exchange
solution that can be up and running in three to five days. Fortunately,
the cost no longer has to be a major factor. "People know that reverse
and forward auction is probably something they should be doing, but
they're not sold into it to the tune of up to a $2 million investment.
It's easy for them to come in with our business model, and try the
technology for a few months and see what kind of results they derive."
According to Palmer, every company that has signed to date has returned
enough in the first 60 days to pay for their first full year of service.
Because it's an ASP, users of SourceXL's private exchange technology
don't have to worry about integration, there's no hardware or software
to install and maintain, and training requirements are minimal.

Besides making the CIO happy by not wanting to spend a million dollars,
the offering is also likely to make the IT department happy. "A lot of
IT managers aren't crazy about giving a universe of user names and
passwords to get behind their firewalls," said Palmer. "This is one of
the applications that fits well outside the firewall. The users can go
out, make the event happen, let everything happen on our system, then
gather the data for the event and put it on their system." Being a
hosted application removes the need to worry about participants getting
behind the firewall.

Many of the larger corporations have already embraced private exchanges
(most notably, in the automotive industry). The ASP model and quick ROI
provided by companies like SourceXL will be the driving force that makes
the private marketplace model more accessible to any enterprise.

» posted by ITworld staff

ITworld

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