As the battle continues between public and private trading exchanges, market analysis firm AMR Research, which specializes in e-business strategy and infrastructure, lists the top challenges facing Consortium Trading Exchanges (CTEs) and offers recommendations to compete.
“When General Motors, Ford Motor Company, and Daimler-Chrysler formed the industry’s first major CTE, it was only a matter of time until similar competitors would unite to build open marketplaces,” said, Bob Parker, vice president and service director, AMR Research. “While CTE members have been aggressive in their funding, they have been relatively passive about looking under the covers of their proposed marketplaces and need to make changes in their strategies to be successful.”
The major challenges for CTEs in the next 12 months:
• Too aggressive in promising functionality
• Expected delays in the delivery of collaborative commerce applications
• Lack of consensus on where functionality should reside
• Cost to integrate back-end system
• Need to budget for the total cost of the exchange
• Supplier recruitment, participation, and integration
• Competition among the best-of-breed vendors
• Immaturity of standard
• Marketplace-to-marketplace integration
• Political infighting
• Competing against private networks
Strategies for CTEs to consider:
Be realistic. The technology hurdles to creating industry collaboration are vastly underestimated. The expectations for the functionality to be provided by exchanges are already sky-high. It is a huge disservice to member companies, which for years struggled to integrate internal systems, to say that the cross-company integration needed to achieve the promised level of collaboration and functionality can be accomplished in the next 12 to 18 months. Articulate the technologies to be deployed with a timeline that members can use to coordinate their individual investments in B2B applications.
Offer quick wins. Auctions and spot buys are valuable, but most members have an existing outlet for these services. CTE operators should look for quick wins, easy ways to serve members while the suite is being developed. Operators could offer horizontal applications, such as a business registry service that contains e-commerce information on current or prospective trading partners, or industry-specific applications, such as trade promotion management in consumer goods and retail. Look at application service provider (ASP) models as a means of offering services with distinct value.
Focus on profitability and liquidity. Profitability and liquidity reinforce that the CTE has effectively met community expectations. Forget notions of elevating the industry to a new level of commerce. The CTE is an untested business model, and survival is anything but assured. Profitablity must guide technology decisions, services offered, and compensation plans. To be an equal amongst the community created, one has to be measured by the same standards.
Conclusion: Facing high expectations and delivering hollow promises, CTEs and founding members need to build confidence and prove value and not set unrealistic expectations in a battle for mindshare.