E-commerce Creating Closed Markets

A new study suggests that contrary to popular belief, business-to-business electronic commerce may actually be stifling competition, not fueling it.

A report released by Ovum Inc. said business-to-business electronic commerce “will be driven by the renaissance of closed trading communities, which support relationships between established trading partners.”

“When organizations try to move beyond the walk-up, self-service model of the Web as a user interface, they run up against a wall,” said Ovum analyst Beth Barling. “Today’s application interfaces are not smart enough to operate in a fully open environment.”

The report said the main reasons that the Internet is creating “closed markets” is because of the medium’s growing popularity, coupled with the fact that businesses are being forced to coordinate more closely than ever with trading partners.

“Coordination can be achieved more easily within closed groups,” Barling said. “We anticipate that a substantial proportion of business-to-business trading will migrate to closed networks over the next five years.”

According to the report, closing a market to known participants “who operate by a common set of rules” could actually make market operations more competitive.

“This is because it is easier to have a shared application vocabulary and a shared set of rules for market operation in a closed system,” Barling said.

Ovum also predicted that improved services for business-to-business electronic commerce would eventually make it easier and less risky for business to adopt new trading processes. More information is available at Ovum’s Web site at www.ovum.com.