Despite rumours of fizzling profits and a dour outlook for B2B exchanges, an all-Canadian e-procurement exchange is about to be launched gradually into the marketplace.
Some B2B advocates would counter it’s a matter of a defining a global standard by way of consolidation, but to date there’s precious little evidence to suggest that B2B is the ferocious animal that has been predicted.
“Most evidence on B2B exchanges points to the fact that they are not doing well – even the ones in commodities – their businesses are only capturing about five to seven per cent of their total volume,” Anthony Wensley told ComputerWorld Canada when queried on the subject recently.
Wensley is an associate professor of management and information systems at the University of Toronto. He teaches courses in e-business and information management in addition to contributing columns on the subject to the Financial Post.
Despite Wensley’s insights, a recent press announcement of an all-Canadian B2B e-procurement exchange will likely be seen as a cause for celebration. BCE Emergis, Bell Canada, CIBC, Scotiabank and Mouvement des caisses Desjardins have joined forces to form Procuron Inc. – an e-procurement company which will use combined purchasing volumes to benefit the Canadian business community.
“Our niche is e-procurement and we have already committed $1 billion towards the infrastructure and the building process,” said Steve McKeown, the newly-crowned president and CEO for Toronto-based Procuron Inc. “We will be the leading technology provider in that space.”
McKeown’s former digs included four years with EDS Corp. – an e-business and IT provider – and as the former president and CEO of Insurance Software Solutions Group Corp. for more than a decade.
“Our initial offerings are focused on indirect goods,” he said. “We’ve already gone through discussions with our suppliers and potential customers, and these are the types of things the average Canadian business is looking for at this time in an electronic environment. We’ll introduce unique offerings such as auction processes in due time.”
Procuron will provide Canuck businesses with a national exchange in which to buy products and services including office equipment and supplies, furniture, computer hardware and accessories, travel (hotel, car rental and airline tickets), courier services and promotional items all at reduced cost and in an efficient manner, according to the company.
Future additions to the exchange’s goods and services will include inventory and catalogue management and information, and financial consulting services. Procuron’s pilot launch is slated for November, with a full roll-out of services expected in the first quarter of 2001 McKeown said.
Meanwhile, the e-procurement provider is expected to pull down about $1 billion in its first year, despite hard data suggesting actual profit for B2B hubs have by and large failed to live up to expectations. Undaunted, McKeown said Procuron will persevere.
“There is some truth to that,” he began. “But our strategy is robust and we’ve talked to people who have not succeeded at this space. We took that into the equation and we’re not coming out too fast. We will ensure we have a solid offering including the right technology and a call centre in place first.”
BCE Emergis will provide, manage and operate the technology infrastructure and will issue performance-based warrants to the other shareholders of the venture.
McKeown added Procuron and its partners have had discussions with the federal Competition Bureau to assure them all dealings are above board.
Through Procuron, buyers will be able to place and track orders with an array of suppliers. Gaining access to the Web site will be made easy through the Internet portals of all five players. Procuron will also boast its own sales force which will target the needs of larger companies, although enterprises of all sizes are encouraged to get involved.
“Large companies have unique requirements in something like this. We felt it necessary to have a focused sales force to explain the benefits (of Procuron) to them,” McKeown said. “After [securing] the larger companies, we’ll work proactively with our shareholders to bring as many SMEs into the fold as possible.”
North American B2B on-line transactions is expected to grow from its current level of US$422 billion to US$2.9 trillion by 2004, comprising of about 17 per cent of all business trade McKeown said. In Canada, the B2B market is predicted to generate about $218 million in transactions by 2004.
“‘Net marketplaces are a younger phenomenon in Canada than in the United States. We’re still in the announcement phase,” said industry analyst Kevin Restivo of IDC Canada in Toronto. “There are a lot of exchanges but not enough business to have them all survive, no different than any other market that’s in a building phase. Canadian businesses are traditionally slower to adopt new technologies and the e-procurement market is no different.”
Restivo recently authored a report on Canadian e-procurement activity. He added, “Look at the recent deals inked by Ariba, Commerce One and Procuron in Canada, large Canadian organizations are getting involved.”