B2B Marketplaces Frustrate Suppliers

Ariba Inc. and Commerce One Inc. are finally rolling out fixes to satisfy suppliers that use on-line business-to-business marketplaces, but the question is whether the efforts are too little and too late.

Marketplace software vendors have been criticized for a couple of years for failing to do enough to justify suppliers’ greater participation in on-line marketplaces, and the lack of supplier buy-in has been a major reason on-line marketplaces have fallen so short of expectations.

It might seem only natural that when suppliers format and ship their on-line catalogues to Ariba’s Commerce Services Network (CSN) and Commerce One’s Commerce One.net systems – virtual marketplaces where businesses can pore through thousands of items and bid for them – that suppliers would be able to see the catalogues from buyers’ perspectives to ensure the information was correct.

But for the most part, there has been no such visibility for CSN’s 10,000 suppliers and half of Commerce One.net’s 1,600 suppliers.

“It’s idiotic to put a catalogue up and not be able to look at it all and verify it’s correct,” says Terry DeLong, director of Internet development at Dale Electric Supply Co. “It shocked me.”

Dale, a Glens Falls, N.Y., distributor of electrical supplies, spent “in the low six figures” for software from Velosel Corp. to view its catalogues. Velosel formed recently when supplier software makers Hubstorm Corp. and Martquest Inc. merged.

Commerce One was in the process of developing technology for its SupplyOrder 3.0 order management software to ease the viewing problem, but Dale needed software immediately. SupplyOrder 3.0 is now being rolled out for Commerce One.net.

Meanwhile, Ariba is offering a temporary fix that would let suppliers view screen shots of its e-procurement software, Ariba Buyer, so they could see what it looked like to log on and search their catalogue.

The vendor is working on separate tools to fix the catalogue-viewing problem, though Ariba officials declined to say when it would be ready.

As of now, both companies offer Web sites that let suppliers see a production view of their content.

Jennifer Turcotte, Ariba’s product marketing manager of supplier enablement, cites the challenges in building an interface that will properly show a supplier its catalogue.

“The challenge has been, and will continue to be, that suppliers accessing this generic user interface will see a view that will not be the exact view that their Ariba Buyer customer sees,” Turcotte says. A supplier’s catalogue will look different to its buyers based on each of its buyers’ customized views.

But Josh Greenbaum, principal at Enterprise Applications Consulting, says Ariba and Commerce One aren’t doing enough for tier-two and lower-level suppliers.

“Exchanges can’t exist without suppliers…and Ariba and Commerce One aren’t making it easy to get on board,” he says.

Their offerings still lack an efficient way for buyers and suppliers to communicate with each other, such as sending purchase orders or exchanging quote information, says Richard Tsu, CIO of Ox International Inc., a Houston maker of on-line catalogue content management software.

Even when Ariba and Commerce One attempted to fix problems, such as by making it easier for buyers to go directly from an on-line marketplace to a supplier’s Web site to find more information, there have been complaints.

An AMR Research Inc. report says Ariba’s PunchOut and Commerce One’s RoundTrip tools, which recently rolled out to address this direct connection issue, have their shortcomings.

For example, the software has had trouble working with third-party software and proven difficult to use for buyers searching across multiple suppliers’ sites, says analyst Louis Columbus. More rules and specifications need to be built into the software, the AMR report says.

Steve Viarengo, Commerce One’s director of solutions strategy, says RoundTrip can help buyers and suppliers communicate, but notes that suppliers need to establish communication with buyers on many fronts.

“RoundTrip isn’t enough, but it’s a valuable way for buyers and suppliers to do business in the market,” Viarengo says.

Suppliers need to work with marketplace system vendors, such as Commerce One, and with other software vendors to ensure their sales, distribution and order-management systems are in sync.

Despite concerns aired by experienced marketplace users, some newcomers are still willing to give the on-line systems a shot.

Hach, which designs and manufactures water quality analysis systems, anticipates joining CSN and Commerce One.net by year-end. The Loveland, Colo., company is also using Velosel’s eSupplier, which has helped Hach syndicate its catalogue of about 10,000 items to four private marketplaces.

Though marketplaces were all the rage last year, Hach took a cautious approach before selling its wares on them, says Derek Walker, the company’s e-business manager.

“We weren’t completely shocked that there weren’t any returns immediately, but we were [disturbed] that it was quite a bit of a hassle to create and maintain catalogues,” he says.

Will They Survive?

Business-to-business software companies Ariba and Commerce One, which once boasted stock prices worth hundreds of dollars, are now fighting for their survival.

Both have bled red ink this year, with Ariba posting a loss of US$273.5 million and Commerce One losing US$2.06 billion in their most recent quarterly reports. Meanwhile, the companies have seen their stock prices plummet to around US$2, shaken up their management teams and cut staff.

Speculation is rife that the companies – which face competitive, pricing and interoperability issues in addition to the technical issues – could get snapped up.

The names of companies from BroadVision Inc. (which also is losing millions of dollars) to IBM Corp. have been mentioned as possible suitors for Ariba, though the strongest rumours involve Manugistics Group Inc., a supply-chain software maker that has also stumbled.

SAP AG, which in June pumped US$225 million into Commerce One’s coffers to expand its ownership in the company to 20 per cent, is considered the most likely company to buy out Commerce One.

Observers say the pricing models pushed by the vendors, which include charging transaction fees and asking for close to US$1 million for software projects, have proven unsustainable.

“The model is dying on the vine and I blame Ariba and Commerce One,” says Joshua Greenbaum, principal of Enterprise Applications Consulting.

Observers say that even in the face of financial and competitive difficulties – increasingly, the likes of Oracle Corp. and PeopleSoft Inc. are invading their turf – Ariba and Commerce One continue to be stubborn about issues such as interoperability.

Neither company is making it easier for their platforms to work together, because each is developing its own XML specification. Ariba created cXML for its marketplace platform, while Commerce One developed xCBL, forcing businesses to buy software for either an Ariba-run marketplace or a Commerce One-run marketplace.

“Each and every one of these larger networks…has its own standards and nuances,” says Richard Tsu, CIO at Ox International, an on-line catalogue content management software maker in Houston. “This brings headaches for companies like us that deal with these multiple networks.”

“Commerce One and Ariba will have trouble justifying their viability,” Tsu says. “They are in a difficult spot: They do not offer what business users require, and they are waiting for the market to develop with a cost structure that is unworkable.”