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Marketers’ virtual dreams

Attention shoppers! Has your e-marketplace got a deal for you! 3/13/2001 Enterprise Pursuits hed: Marketers’ virtual dreams dek: Attention shoppers! Has your e-marketplace got a deal for you! By Nelson King

Unless you’re really new to the enterprise business or you’ve got a radically truncated memory, you can remember a time when there were no online business-to-business marketplaces. E-marketplaces, as they are now called, sort of jumped out of the Web/Internet matrix of capabilities only three or four years ago.

By putting together the ability to display enormous catalogs of products (typically for a specific industry); allow rapid searches of sources, features and prices; and intermediate all the tough little transaction details (such as processing, fulfillment, payment, and returns), e-marketplaces and their operators offered the tasty-looking carrots of streamlined purchasing, better pricing, easier payment, and perhaps better inventory control.

In very short order more than 1000 online marketplaces proclaimed themselves open for business. Some industries have more than 100 marketplaces. On top of the general B2B euphoria, the marketplace concept was touted as the way to conduct business in the 21st century.

The crest in hoopla arrived somewhere in early 2000. Of course, then came the morbid dot-com debacle. As hundreds of online companies slid into the bit-bucket, they started dragging other aspects of the “new economy” with them. B2B was not immune, especially e-marketplaces. Mergers, consolidations, and a few collapses followed. Most analysts agree that within a couple of years only a few hundred marketplaces will remain; however, the survivors will have solid business models and sustainable markets.

Is there a pattern here? Duh. I know it’s not the oldest cycle in the world, but those of us in the IT business should recognize its many iterations: New technology arrives with lots of promise. Hype escalates. New technology becomes fad or even frenzy. Hype subsides and a few doubts appear. The no-longer-new technology stumbles a bit (sometimes a lot). Naysayers proclaim themselves correct. The technology contracts. The technology is reassessed and a normal business level is found. (At least until a similar but newer technology appears.)

Astute technology managers are aware of this cycle and often use one of two strategies: Jump in early, take the risks, and hope for the rewards of early adopters. Or, they wait until the rubble settles and then carefully pick and choose the good parts. You can apply this thinking to all kinds of technological advances such as personal computers, graphical user interfaces, wireless computing, and E-marketplaces.

The problem is either that there aren’t many astute managers out there, or it’s a lot more difficult to peg the cycle than we think. I’m making an unscientific guess, but for all the participants in any new technology, I’ll bet 10 to 20 percent are early adopters, 10 to 20 percent are late reapers, and the majority just do it somewhere along the long. That means the majority of participants fit into the fat part of the bell curve–those who are a little too late to get a big competitive advantage or who get burned the most when a technology tanks. Again unscientifically (mostly from screams from friends in the business world), I’d say this pattern holds for e-marketplaces. What gives?

You know what, I’d called it enthused indifference to the ups and downs. Yes, it appears that the e-marketplace business is following the cycle, and lots of companies are being burned as their marketplaces of choice disappear. But the underlying strength of the concept–using online purchasing to streamline the process–was there from the first marketplace and still is there. Sure hype played a role. Even hard-boiled purchasing agents became enamored of e-marketplaces because the publicity level was high, and with (apparently) so many other companies joining in, few companies felt they could sit it out.

Still, as they got into the business-to-business buying or selling online, most companies found ways to profit from it. Most were not looking for a killing, they just wanted improvement–and they got it. That’s why, when the dust settles on the e-marketplace sites, their participants will not only be the gleaners but that vast majority who just thought it was a good idea.

Editor at Large Nelson King also writes Pursuits monthly for ComputerUser magazine.

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