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Internet B2B: What We Might Expect
Abstract
We are currently preparing a survey of Internet Business-to-Business (Internet B2B) users and facilitators in ASEAN, specifically targeting manufacturing and manufacturing support industries. We expect to find that B2B portals will focus on facilitating transactions between companies in different countries, with minimal intermediation. For any particular company, the use of multiple B2B exchanges and low transaction volume through each one will be the norm. While SMEs will have a presence, the importance economies of scale and experience with IT suggest that participants will tend to be larger companies.We are currently preparing a survey of Internet Business-to-Business (Internet B2B) users and facilitators in ASEAN, specifically targeting manufacturing and manufacturing support industries. This paper outlines our expectations of what we might find as we explore the Internet B2B landscape in the region, with a particular focus on Small and Medium Enterprises (SMEs). The importance of SMEs to manufacturing is undisputed. In the US, SMEs are responsible for nearly 40 percent of the nation’s manufacturing employment; in Europe and Japan, small firms account for 45 to 60 percent of manufacturing employment [8]. In the case of EDI, it is well documented that large companies can and will force smaller suppliers to adopt technology by making participation in the network a precondition for continued business. Indeed, the OECD [10] cites estimates that up to 70% of EDI links are established primarily because a major corporate of government customer specifies doing so as a term of contract. While Malone, et.al. [7] see the benefit of the “electronic integration effect” as lower transaction costs, these benefits often accrue to the larger partner at the expense of the smaller. For example, Hammer [5] relates that when Ford moved to a paperless accounting system, some suppliers still printed invoices but threw them away instead of sending them. Private markets, where suppliers bid on packages of work, are also growing in popularity and utility. General Electric began purchasing maintenance materials over the Internet, and realized cost savings in the range of 30-40% [18]. GE now does more business through this private marketplace than all public exchanges combined [12]. However, the element of coercion remains in the private exchange: if you want to do business with the company, you must use this channel. Migrating EDI systems to semi-private networks based on Internet technology has no effect on the way they are used. In these environments of competitive necessity, motivations are clear. Uncovering motivations for voluntary investment and participation in Internet B2B requires some further investigation. AMR Research found that not even 1% of the 600 B2B portals they surveyed had reached a feasible trading volume [16], and IDC reported that of the approximately 1000 B2B exchanges launched between early 2000 and mid-2001, only about 100 are handling any genuine transactions [17]. In this paper, we begin with some preliminary findings from a recent study in Singapore. Taking them at face value, we use the literature to extrapolate their relevance to hypotheses we might form for our own study. Here, we use the terms “Internet B2B”, “B2B portals”, “public exchanges”, and “electronic markets” interchangeably. Unless otherwise specified, we use these terms to describe a World-Wide Web (WWW) site that acts as a marketing channel for products that are of interest to businesses rather than consumers, operated by a third-party that does not produce or use the products in question. Our intention is to gloss over the wide range of possible business models in favor of uncovering common motivations for participation.
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